ATRO

The Dichotomy of Airlines and Aerospace

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On Monday, top insurance idea AIG (AIG) announced that it would sell International Lease Finance Corporation (ILFC) to aircraft leasing firm AerCap Holdings (AER) for $5.4 billion, consisting of $3 billion in cash and the balance in newly-issued AerCap common shares. Though we think ILFC was one of the crown jewels of AIG’s business particularly considering the prospects for global air travel demand in coming years, the price is fair and opportunistic, especially since AerCap is risking its investment-grade status to facilitate the deal. We don’t think better terms could have been had by either party, given financial constraints, and shares of both entities are moving higher on the news. The combined AerCap-ILFC will be #2 on the world stage … Read more

Flashback 2008: Brian Nelson and Pat Dorsey — the Morningstar Years

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We think it’s important to know the people you’re working with at Valuentum. We’re not some robot behind the scenes that only lives in the Internet. We’re hard-working individuals with families just like you. Let’s take a flashback in time to when Valuentum’s current President of Equity Research Brian Nelson called for Boeing’s shares to hit $110 in 2008, while he was working as a Senior Analyst at Morningstar. Shares are just a few dollars away from that level today. Source: http://www.youtube.com/user/MorningstarInc?feature=watch << Learn more about Brian Nelson, CFA Aerospace & Defense – Prime: BA, FLIR, GD, LLL, LMT, NOC, RTN Aerospace Suppliers: AIR, ATRO, COL, HEI, HXL, PCP, SPR, TDY, TXT

Boeing’s and United Technologies’ Second Quarters Reinforce Strength in Aerospace

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On Wednesday, Boeing (click ticker for report: ) reported better-than-consensus top and bottom line results for its second quarter. Revenue advanced 9% thanks to higher deliveries of the 787 Dreamliner and the workhorse 737 platform, while backlog grew to a record $410 billion (nearly 5 times expected 2013 revenue), including $40 billion of net orders during the quarter. Core earnings per share jumped 13%, as operating cash flow (before pension contributions) more than doubled, to $3.5 billion. Free cash flow generation in the period was just over $3 billion, or nearly 14% of revenue. Management raised its 2013 revenue outlook to the range of $83-$86 billion thanks to improved performance in its ‘Defense, Space, & Security’ segment and upped its … Read more

Market Overreacts to Heat Damage on Boeing’s 787 at Heathrow

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Boeing’s (click ticker for report: ) shares tumbled a few percentage points Friday after reports of a fire in the upper part of the rear fuselage of one of Ethiopian Airlines’ 787 Dreamliners that was parked on the tarmac at London Heathrow Airport. Preliminary results of the investigation reveal that the fire (heat damage) was not caused by the plane’s lithium-ion battery (location of batteries shown here), which had been the trigger of previous fire-related incidents on the aircraft. Interestingly, the plane had been parked for as many as eight hours and was unoccupied, leaving the cause of the blaze unidentified (unwitnessed) and somewhat peculiar. We expect the aft fuselage on this 787 to be a total loss, given our assessment … Read more

Precision Castparts Scoops Up Permaswage; Commercial Aircraft Orders Keep Rolling In

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On Thursday, Best Ideas Newsletter portfolio holding Precision Castparts (click ticker for report: ) acquired California-based aerospace supplier Permaswage for $600 million. Permaswage specializes in swage fittings, and its technology is included in almost every major commercial and military aircraft program. The deal is right in Precision Castparts’ wheelhouse as it improves dollar-content per aircraft and enhances the firm’s already-robust product suite. Precision Castparts’ CEO Mark Donegan should have no problems folding in the firm’s state-of-the-art operations and driving material synergies across the board. Though profitability disclosures are limited, we have a high degree of confidence that cost-savings and revenue enhancements will trump any meaningful premium that may have been paid above the entity’s fair value. We also think the deal strengthens Precision Castparts’ position in separable … Read more

Why Valuentum’s Email Transaction Alerts Are Worth Paying Attention To

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Valuentum subscribers have noticed that we’ve been quite busy as of late, adding protection to our portfolio in the form of a broader-market put option and taking some large profits in Astronics (ATRO) and eBay (EBAY). We’ve highlighted our best-in-class hit rate–meaning that a large percentage of the firms we added to the portfolio are outperforming the broad market benchmark. But there are a couple ways of looking at our performance–the first is relative outperformance versus the market since inception, which is at 28 percentage points. Investors duplicating our portfolio are enjoying this outperformance. Another way of looking at our track record, however, is to evaluate the performance of additions to the portfolio on the long side (purchases) since inception–i.e. … Read more

Boeing Keeps Raking in Aircraft Orders

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Boeing (click ticker for report: ) updated its ‘Orders and Deliveries‘ page on its website this week, and we were pleased to see a nice uptick in orders. We keep a close eye on commercial aircraft orders as the pace remains a key driver of sentiment within the aerospace industry, even though Boeing and Airbus are effectively “sold out” for at least the next 12 months. According to the disclosure, the plane-maker has booked roughly 428 net orders through May 21 of this year, which puts the aerospace giant well on its way to achieving a book-to-bill north of 1 (signaling backlog expansion). Though our positive thesis on the aerospace supply chain–AAR (AIR), Astronics (ATRO), Rockwell Collins (COL), HEICO (HEI), Hexcel Corp (HXL), Precision Castparts (PCP), Spirit AeroSystems (SPR), … Read more

Astronics Surges on Record Results

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Best Ideas Newsletter holding Astronics (click ticker for report: ) reported a first quarter that displayed the company’s fantastic earnings potential. Revenue jumped 14% year-over-year to $76 million, which exceeded consensus estimates by a few million dollars. Earnings growth was robust as earnings per share rose 40% year-over-year to $0.56, which was significantly above consensus estimates. The firm’s backlog increased $4.5 million sequentially to a record high of $119 million. To top it off, the firm generated $12.5 million in free cash flow. Aerospace continued to be the standout segment. Total aerospace revenue rose 16% year-over-year to $71.7 million. While commercial revenue also grew 16%, business jet revenue jumped 30% year-over-year and FAA/Airport revenue increased 48% year-over-year. Although the FAA … Read more

FAA Clears the Boeing Battery Solution; Supply-Chain Value Still Evident

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Late yesterday afternoon, airplane manufacturer and designer Boeing (click ticker for report: ) received approval for the company’s plan to test and certify batteries for its 787 Dreamliner jet. Boeing’s lithium ion battery issues plagued several of its new jets, including many in Japan, which caused substantial weakness in shares even though orders remained strong, and several industry insiders indicated the problem wasn’t anything out of the ordinary. On January 17th, we called for the bottom in sentiment regarding the Boeing 787, and shares of the company have rallied 13% since. Although we did not believe the lithium ion battery would be a long-term headwind for Boeing, several market participants wondered if the company could develop a satisfactory solution, weighing … Read more