KeyBanc Upgrades Kaman On Potential M&A Moves

Meetings with management suggest that Kaman Corporation (NYSE: KAMN) would focus on acquiring highly engineered products in attractive end markets and that the company has an active deal pipeline, according to KeyBanc Capital Markets.

The Analyst

KeyBanc’s Steve Barger upgraded the rating on Kaman to Overweight while keeping the price target unchanged at $72.

The Thesis

With the close of the Distribution sale, Kaman has around $1 billion available for redeployment, Barger said in the note.

The company is likely to “take a disciplined approach” in deploying these funds and may not spend the complete amount in the near term, the analyst mentioned.

The focus would be on acquiring highly engineered products in attractive end markets, like aerospace and medical. Barger added that he expects the targets to be accretive to Kaman’s margin, EPS and FCF, which would expand or at least support the company’s valuation multiple.

Management also remains focused on reducing costs by $15 million-$20 million following the divestiture.

“Beyond those identified savings, we think KAMN is focused on appropriately managing its overhead structure to accommodate its evolving portfolio,” the analyst wrote.

Price Action

Shares of Kaman were up 2.20% to $63.51 Thursday.

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