EDAC

Boeing’s Fourth Quarter Supports Our Thesis on Aerospace

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On Wednesday, aerospace giant Boeing (click ticker for report: ) reported strong fourth-quarter results. We’re holding steady with our fair value estimate, despite the constant flow of negative news about the 787 Dreamliner. Boeing’s total revenue advanced 14% in the period, though modest operating margin contraction led to a slightly lower pace of core operating earnings growth, which came in at 9% (on a non-GAAP basis). Operating cash flow surged 42% as the company continues to better handle inventories related to the 787 Dreamliner. However, the firm’s revolutionary plane currently remains grounded due to a series of battery problems, and its decision not to slow production could begin to pressure cash flow again to a degree. Still, we remain confident … Read more

Making Another Call on Precision Castparts; Raising Our Fair Value Estimate Materially

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Best Ideas Newsletter portfolio holding Precision Castparts (click ticker for report: ) reported solid fiscal third-quarter results Thursday that showed strong top-line and operating-income expansion and left us feeling quite optimistic about its recently-announced acquisition of Titanium Metals (TIE). We’re raising our fair value estimate for Precision Castparts to $246 per share (was $200) on the basis of better future margin forecasts associated with the deal. The metal-bender’s sales advanced 13% from the year-ago period, while consolidated segment operating income jumped at the same pace. Though the firm’s 25.5% operating margin was flat from the year-ago quarter, the most recently-reported period included $18 million in higher corporate and financing expense from its acquisitive activity. For investors in micro-cap peer (and … Read more

United Technologies Looks to a Strong 2013 After a Transformative 2012

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United Technologies (click ticker for report: ) posted mixed fourth-quarter results as it ended what we’d describe as a transformational year. The company scooped up aerospace supplier Goodrich and a larger stake in International Aero Engines (IAE) during 2012, two moves we applaud as both increase the firm’s exposure to a burgeoning commercial aerospace delivery advance in coming years. Sales during the quarter jumped 14% from the prior-year period, though organic expansion was flat. The company’s adjusted segment operating margin came in at 13.3%, roughly 200 basis points lower than last year’s quarterly mark. Earnings per share in the quarter dropped 27% from the same period a year ago, but after adjusting for restructuring items, profits fell just 9%. Free cash flow, … Read more

Bottom in Sentiment Has Been Reached in Boeing’s 787; Orders for Planes Surge at the Airframe Makers

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What a wild ride it has been for Boeing (click ticker for report: ) in the past few years. In a move widely applauded for choosing to build the incredibly efficient, mostly-composite, revolutionary 787 Dreamliner (instead of a gargantuan super-jumbo like the double-decker Airbus A380), the engineering, development, and production of the plane has been filled with more than its share of costly problems. Not only was the plane delayed at least a half dozen times during the engineering and development of the aircraft to first flight, but the company is dealing with highly-publicized “teething” pains now that the plane is in service. This morning, Europe, Japan and India have joined the US Federal Aviation Administration (FAA) in grounding the … Read more

Alcoa’s Guidance Bodes Well for Aerospace

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Industrial stalwart Alcoa (click ticker for report: ) reported solid fourth quarter results and relatively optimistic 2013 guidance. Revenue exceeded expectations, falling 2% year-over-year to $5.9 billion. Earnings, after excluding several one-off items, were $0.06, roughly in-line with consensus estimates and favorable compared to the same period a year ago. Upstream products continue to feel the pressure of weaker commodity pricing, which has obviously negatively impacted earnings. However, the company has been able to lower its position on the cost curve, leaving it with considerable leverage to the upside in the event of price appreciation. Though upstream revenue remains mostly weak (even with favorable supply/demand dynamics), Alcoa continues to drive strong earnings from its midstream and downstream products, particularly in … Read more

Dear Valuentum Member

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In such a short time that you’ve known us, you have seen us do so much: from generating more than 25 percentage points of outperformance in our Best Ideas portfolio since inception (May 2011) to delivering on our high-single-digit return goal of our Dividend Growth portfolio during 2012 to the Valuentum Dividend Cushion score predicting the dividend cuts of JC Penney (JCP), SuperValu (SVU), Roundy’s (RNDY), and others. You’ve seen us identify a triple in EDAC Tech (EDAC) and predict the bankruptcy of the parent of American Airlines (AMR). These are tremendous accomplishments. There’s an old saying in the market that if your winners are outperforming your losers, you’re doing a great job. Through November of last year, 87% of … Read more

Fiscal Cliff Averted; Aerospace Rallying

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After a volatile December, two of our favorite aerospace names, Astronics (click ticker for report: ) and EDAC Technologies (click ticker for report: ), are rallying significantly after a deal was finally reached to avert the fiscal cliff. Precision Castparts (click ticker for report: ), which had steadily moved higher during the fiscal-cliff ordeal thanks to optimism surrounding its planned acquisition of Titanium Metals (TIE), is also seeing strength today. We assumed both profit taking and overblown fears of defense cuts were the culprit behind the increased volatility, and it seems as though that could be the case. We continue to see substantial upside at these firms thanks to the massive, multi-year commercial aerospace backlogs of the large airframe makers. Our Best Ideas portfolio … Read more