Exclusive Analysis for the Discerning Investor
The global aerospace giant reported strong second-quarter results and raised its top- and bottom-line outlook for 2012. The firm’s commercial backlog remains robust at nearly 4,000 unfulfilled orders, and we continue to expect a boom in commercial aircraft deliveries in coming years.
Aluminum giant Alcoa reported better than expected results. We think shares are fairly valued.
Although a number of suppliers to the aerospace industry have come under pressure as of late, the strength in commercial aerospace demand remains firm.
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Alcoa kicked off first-quarter earnings season with a solid report. Despite views that first-quarter earnings growth will be meager and almost negligible absent Apple (AAPL), we strongly disagree. We expect continued strong performance out of the cyclical aerospace sector coupled with improving earnings from the energy firms levered to oil. Alcoa, for example, posted $0.09 in earnings per share during the period versus consensus expectations of a $0.04 per share loss. But we had been expecting the earnings beat from the aluminum giant, and our fair value estimate for Alcoa remains unchanged following the report. We view Alcoa’s report more important for interpreting how certain end markets are performing than anything else. With that said, Alcoa reported year-over-year revenue growth … Read more
Best idea Astronics (ATRO) reported strong fourth-quarter results Monday and offered an outlook for 2012 that pleased most investors. The stock is surging roughly 8% today, and we continue to believe the company belongs in the portfolio of our Best Ideas Newsletter. We were impressed with Astronics’ performance pretty much across the board. Fourth-quarter revenue jumped 18% led by a 24.5% increase in aerospace sales, while gross profit surged nearly 40% on the heels of 4.4 percentage points of gross-margin expansion. Astronics continues to reap the benefits of higher demand for both aircraft cabin electronics products and aircraft lighting products. The company’s operating margin was roughly flat in the period, but after excluding a goodwill impairment loss related to … Read more
Best-idea Astronics (ATRO) posted excellent third-quarter results Thursday that showed both strong sales and earnings expansion. We are maintaining our above-market $47 fair value estimate, which represents about 15.6 times earnings if we annualize this quarter’s ($0.52 per share). We will be retaining our outsize position in our Best Ideas Newsletter. Astronics’ top line reached a record, advancing 13%, while diluted earnings per share jumped 41%. Commercial transport revenue jumped 23%, while sales from its business jet segment increased 20%. The firm’s gross margin ticked down about 0.5 percentage points, which directly impacted the operating line, as SG&A as a percentage of revenue held relatively steady at 11.3% of sales. The firm’s operating margin was 14% in the third quarter … Read more
Best-idea Astronics (ATRO) reported solid second-quarter results Tuesday and raised its revenue outlook for this year. Revenue jumped nearly 18% from the same period a year ago, while the firm’s operating margin expanded over 300 basis points, to 13.1%. During the quarter, the firm received its second-best quarterly bookings in history, at nearly $60 million. Bookings in its aerospace segment advanced 19% from last year’s second quarter and were up 13% on a sequential basis. Total backlog also advanced sequentially and on a year-over-year basis, and the firm noted that it expects to ship 75% of its total backlog by the end of this year. We think the firm’s order pipeline remains robust, given expected build rates of commercial aircraft … Read more
This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/277504-how-profitable-is-boeings-787-dreamliner-not-very With Boeing’s (BA) 787 Dreamliner in the final stages of testing, we thought it would be helpful to clarify the profitability of this program (or perhaps more appropriate, the lack thereof), at least in its early stages. The growth potential of this program has been well-documented, but the 787 platform’s profitability will be nowhere near what management had expected before it experienced the first of many delays of its Dreamliner. We think investors should be made aware of just how much leeway Boeing has in determining earnings, and why Boeing is one of the more difficult firms for the analyst community to get their arms around due to the lack of transparency. We believe Boeing will set the initial 787 accounting … Read more
This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273893-9-aerospace-suppliers-with-attractive-peg-ratios Although there is no substitute for assessing a firm’s valuation on a discounted cash-flow basis, evaluating a firm’s value through its PEG ratio may be the next-best option. Provided in this article is an aerospace supplier cheat sheet that gives a brief description, the market cap, consensus forecasts, long-term growth estimates, and the corresponding PEG ratios for suppliers within the commercial aerospace chain. This list should come in handy as commercial aircraft deliveries soar in coming years. (Click charts to expand) Based on the cheat sheet below, there are nine aerospace suppliers that currently garner a PEG ratio below 1, derived by taking the price-to-earnings ratio based on next year’s … Read more