Park Aerospace: A Bright Spot In The Aerospace Supply Chain

Summary

• In a tough environment for commercial aerospace, Park Aerospace is  situated to benefit from defense spending until the commercial side returns.
• Park is the sole supplier of certain key composite materials in the LEAP engines project used by Airbus and COMAC, and does not have major exposure to Boeing.
• While the overall industry enters recovery, Park has a steady dividend yielding around 3% that has not been reduced, and patient investors can bide their time as growth returns.

I suppose it is fairly normal to use the end of the calendar year as a natural time to look back and consider how different aspects of a portfolio held up through the year, and ponder what decisions may need to be made that will change in the coming year. One of the relative bright spots for me during 2020 has turned out to be Park Aerospace (NYSE:PKE), a smaller maker in the specialized market of supplying composite materials and parts used by other suppliers in the complex aerospace supply chain.

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While aerospace generally in 2020 has been through a difficult year, I think 2021 is shaping up for improvements, and Park Aerospace may still be flying under the radar.

In the above chart, I specifically picked a defense and aerospace fund from Fidelity (FSDAX) for a broad sense of industry performance in the last year, alongside two of Park Aerospace's larger customers, Kratos Defense & Security Solutions (KTOS) and Meggitt Plc (MEGGF) (MEGGY). Other major customers include a subsidiary of Singapore Technologies, known also as ST Engineering (OTCPK:SGGKF) and GKN Aerospace. Clearly not everyone was hurting, as Kratos returned excellent results in 2020, but on the whole it has been a fairly tough twelve months, perhaps especially for those focused on supplying commercial aerospace in the year that Covid-19 really hit new orders hard, especially for Boeing (BA).

A Brief Review of Park Aerospace

Park Aerospace is in the business of providing key materials and components, like rocket nozzles and resins, to other contractors involved in supplying the aerospace and defense OEM companies. Roughly half of its revenue currently comes from the defense sector, which is up fairly significantly as a percentage of the whole from fiscal 2020, when military sales was just 35% of the total. No doubt this is due in some

Analyst’s Disclosure:I am/we are long PKE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.