PCP

United Technologies, Precision Castparts Confirm Aerospace Strength

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On Wednesday, industrial conglomerate United Technologies (UTX) reported solid fourth-quarter results. During 2013, earnings per share and net income attributable to common shareholders advanced 16% and 17%, respectively, over the prior year period. Though most of it was acquired expansion, sales jumped 9%, while the company’s adjusted segment operating margin increased 90 basis points, to 15.7%. Cash flow from operations came in at $7.5 billion for the year and capital expenditures were $1.7 billion, resulting in free cash flow of $5.8 billion (or 9.3% of sales). We were particularly pleased with CEO Chenevert’s comments about witnessing an acceleration of organic growth throughout the year. Fourth-quarter organic sales growth was 4% (better than the 1% pace recorded for the entire year), … Read more

Boeing Sets Records for 2013; Aerospace Thesis Remains Intact

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Boeing (BA) revealed the tremendous strength of global commercial aerospace demand in a news release Monday. During 2013, the aerospace giant noted that it delivered a record 648 commercial deliveries, received a record 1,531 gross commercial orders for the year, and posted a record 5,080 units in its backlog of unfulfilled orders at the end of 2013. The 1,355 net commercial order mark for the year was the second-largest in company history. Boeing continues to execute well on its production rate increases, and three of its programs set records for deliveries during the year: the 737 program, the 777 program, and the 787 Dreamliner program. 2013 was a fantastic year across the board for Boeing and for much of the … Read more

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

Green Letter Day for Industrial Best Ideas Portfolio Holdings; Record Results for Ford and Precision Castparts

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I guess you can say a ‘Red Letter Day’ for our Best Ideas portfolio can be more appropriately called a ‘Green Letter Day,’ as stock-market advances are typically colored in green. Today is such a day for two holdings in our Best Ideas portfolio: Ford (F) and Precision Castparts (PCP). These are two companies that we have pounded the table on repeatedly during the past couple years. Ford Posts Record 3Q Pre-Tax Profit On Thursday, Ford (F) posted excellent third-quarter results that showed fantastic top and bottom-line performance. Total company revenue advanced an impressive 12% thanks to wholesale volume expansion of 16% and year-over-year share gains in all regions. The auto maker also posted record third-quarter pre-tax profit of $2.59 … Read more

Third-Quarter Industrial Earnings Support Exposure in Best Ideas Portfolio

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For starters, if you haven’t yet read through our piece on General Electric’s (GE) third-quarter earnings, it’s a must-read. The step-up in backlog and order trends at the industrial behemoth are quite remarkable, and we think GE’s performance bodes well for the sector as a whole. Still, let’s drill down on a few themes across the industrial space and how our Best Ideas portfolio is well-positioned to capture the strength of underlying trends. Danaher (DHR) Danaher reported third-quarter results Thursday that showed revenue expansion of 5.5% and diluted net earnings per share growth of 9%. The company generated 30 basis points of operating-margin improvement and generated more than $800 million in free cash flow, or about 17.8% of revenue (a very … 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

Precision Castparts Reports Record Fiscal First Quarter Results

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On Thursday, Best Ideas Newsletter portfolio holding Precision Castparts (click ticker for report: ) issued decent first quarter fiscal 2014 results. Though performance fell below consensus estimates, the aerospace engine casting provider achieved record diluted earnings per share, record consolidated segment operating margins (27.2%), and strong cash generation in the period. We’re expecting significant earnings expansion in coming years as a result of its recent acquisition of Titanium Metals (TIMET) coupled with the current high-level of commercial aircraft deliveries. Revenue expanded 20% in the period thanks to elevated aircraft build rates and acquisitive activity, while consolidated segment operating income jumped 25%. The operating margin in its ‘Investment Cast Products’ segment advanced 140 basis points, to 34.6%, despite relatively flat segment … Read more

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

Alcoa Is Stuck in Neutral

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Monday afternoon, industrial bellwether Alcoa (click ticker for report: ) announced solid second-quarter results. Revenue was down 2% year-over-year to $5.8 billion, a tad shy of consensus estimates. Excluding the impact of special items, earnings per share were up one cent year-over-year to $0.07, exceeding consensus estimates. Free cash flow declined slightly year-over-year to $228 million, or 4% of revenue. Engineered Products and Solutions (EPS) Image Source: AA Analyst Presentation Q2 2013 Yet again, Alcoa’s Engineered Products and Solutions business, its largest profit driver, was the standout performer for the quarter. After tax operating income (ATOI) hit a record level of $193 million, up 23% year-over-year, on revenue that only increased 3% year-over-year. The segment registered an all-time high in … Read more