EADSY.PK

Honeywell Shows Continued Strong Execution; Revenue Environment Weakens

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Last Friday, Honeywell (click ticker for report: ) reported mixed third-quarter results that showed weakness in Europe (as expected) but strength in commercial aerospace, infrastructure spending, and oil and gas investments. Though revenue was roughly flat from the same period a year ago, organic sales edged up 2% and earnings per share from continuing operations jumped nearly 40%, though the firm benefited from a more-favorable tax rate in the most recently reported quarter. The company lowered its 2012 revenue guidance modestly, but it only narrowed the range of its 2012 proforma earnings per share outlook to $4.45-$4.50 per share (was $4.40-$4.55 per share), still representing a double-digit increase from last year. Free cash flow for the year is expected to … Read more

GE Posts Strong Second-Quarter Results, Industrial Orders Surge

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General Electric (GE) posted strong second-quarter results Friday. Adjusted revenue advanced 7% in the period, while operating profit burgeoned 18% from last year’s quarter. The conglomerate experienced particular earnings strength from recovering GE Capital and its transportation segment, while its energy infrastructure and home and business solutions segments lagged behind considerably. Importantly, the company noted that infrastructure orders were up 24%, with equipment and services orders increasing 33% and 16%, respectively — backlog reached a new all-time high of $189 billion at the end of the quarter (it had been $177 billion in the first quarter). GE indicated that industrial earnings should improve in the second half of this year, with expectations for the cycle to accelerate in 2012. We … Read more

Our Take on United Techologies’ Second Quarter

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United Technologies (UTX) posted excellent second-quarter results Wednesday, with sales advancing 9% (6% organic) and net income jumping nearly 20% from the prior-year period. The firm’s operating margin for the quarter was 15.9%, 120 basis points higher than last year. Impressively, the firm noted that for the first time since mid-2008, all six of its business segments showed organic growth in the period. Further, order rates at Otis were up 23% thanks to strong demand from Asia and China, while order rates for commercial HVAC new equipment at Carrier jumped 13%. The firm’s aerospace segments continue to perform well, and we expect such strength to continue as Boeing (BA) and Airbus (EADSY.PK) continue to ramp up commercial aircraft deliveries in … Read more

AMR’s Second-Quarter Results: Good News for the Shorts

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AMR Corp. (AMR), the parent of American Airlines, reported dismal second-quarter results Tuesday, as the rapid escalation in fuel prices pushed it into a deep loss during the period. Though revenue rose 8% from the same period a year ago, the company reported a net loss of $286 million, or $0.85 per share, which compares to a net loss of $0.03 per share last year. Due largely to its fuel-inefficient fleet, the carrier paid nearly 31% more in fuel costs during the period from last year’s quarter, amounting to an incremental $500 million-plus headwind. American’s mainline load factor fell 0.3 percentage points from the year ago period, suggesting that demand is not keeping up with capacity additions. We maintain our bearish … Read more

Are Boeing’s Competitive Advantages Waning? We Think So.

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Michael J. Mauboussin, when working at CSFB in 2002, published an excellent piece on the concept of an economic moat. Warren Buffet is often given the credit of coining the term. Morningstar (MORN) and other research firms like Valuentum (via its ValueCreation rating) have embraced this compelling idea, embedding the concept in their research framework. In this article, we discuss whether we think Boeing (BA) has lost its moat, in light of the recent split-order of 460 planes from American Airlines (AMR). First of all, we think the market is completely misunderstanding the long-term implications of the recently announced and massive AMR order to replace its narrowbody fleet (which was split between Boeing and Airbus). Though receiving orders is, in itself, positive, this particular order comes at the expense of Boeing’s exclusivity with AMR — the carrier currently flies … Read more

AMR Likely to Split Massive Order Between Boeing, Airbus

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/280307-amr-likely-to-split-massive-order-between-boeing-airbus As we outlined a few weeks ago in “AMR’s Big Order to Pressure Cash Flow, Boeing in Precarious Position,” we indicated the increasing likelihood that AMR (which holds American Airlines) may split a massive $15 billion-plus order between Boeing (BA) and Airbus to replace its aging fleet of narrowbodies. This would represent a huge shift at the major carrier, as AMR currently flies all-Boeing aircraft. Verbatim from our July 1 report: Boeing is in a rather precarious position. Airbus has claimed all along that it will capture customers currently flying the 737 with its A320neo (new engine option), an upgrade to its A320 that has the option to sport more fuel-efficient engines. The … Read more

AMR’s Big Order to Pressure Cash Flow, Boeing in Precarious Position

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/277628-amrs-big-order-to-pressure-cash-flow-boeing-in-precarious-position Shortly after we released our analysis of the fleets of the largest domestic carriers, The Wall Street Journal reported that AMR Corp. (AMR) is interested in ordering as many as 250 planes from either Boeing (BA) or Airbus (EADSY.PK). Our analysis, the summary graph of which we provide below, indicated that AMR is roughly on par with Delta (DAL) for having the oldest fleet (read fuel-inefficient) among the Big 4 domestic majors, so we view this move as inevitable. (Click chart to expand) The Wall Street Journal also indicated that the order value could be as high as $15 billion (comprising about 250 planes), and we suspect the new aircraft being evaluated will … Read more