Shares of the world’s largest aircraft interiors manufacturer B/E Aerospace (BEAV) came under pressure Wednesday as the company reported mixed results for the third quarter. From a technical perspective, BEAV stock also failed near a band of resistance, making a further slide in the shares likely in the near-term.
The numbers? B/E Aerospace earnings came to $1.16 per share, beating analyst estimates by a pair of pennies. Revenues came in at $1.10 billion, a little below analyst estimates of $1.10 billion. On a year-over-year basis, that represented earnings growth of 30% and sales growth of 24%.
Through a multiyear lens, the growth story for B/E Aerospace has been nothing short of amazing, which is reflected in the steep 170% rise of the share price from August 2013 up to the top in May 2014.
When it comes to big supplying companies such as B/E Aerospace, it also helps to look at shares of some of their largest clients. And in that vein, it’s notable that Boeing (BA), one of BEAV’s largest clients, fell about 4.5% Wednesday in one of the largest one-day selloffs of the year.
BEAV Stock Charts
Looking at the multiyear logarithmic weekly chart of BEAV stock, we note that upside momentum — as measured by the Relative Strength Index (RSI) — topped in late 2013, and while price didn’t exhaust itself until May 2013, it then quickly snapped its late 2008 uptrend line. But because tops take time to develop, the stock first moved sideways for another few months before coming under better pressure in the second half of July.
From this perspective, BEAV stock looks to have developed a good topping pattern for the intermediate term — one that likely has the stock capped on the upside for the time being.
On the daily chart, note the aforementioned topping period (blue box); from a technical perspective, it has the looks of a so called “island top.” When BEAV stock broke back below the neck-line in late July, it retested it along with the 200-day simple moving average (red line) from below one more time in September before embarking on the next leg lower. Late last week and early this week, the stock bounced along with the broader market, bringing it back into its next lower area of resistance around the $80 mark, which with Wednesday’s post-earnings selloff was promptly rejected.
Wednesday’s price action also left an ugly bearish outside day behind on the daily chart, which now argues for continued downside momentum below last week’s lows.
Active investors and traders could consider leaning short on B/E Aerospace against the $80 area with a price target in the mid- to high $60s.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
