PCP

Precision Castparts Issues Fiscal Third-Quarter Results

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Metal-bender Precision Castparts (PCP) reported strong fiscal third-quarter results but failed to live up to consensus expectations on the top and bottom line. We continue to believe that Precision Castparts has valuation upside from these levels, but we are more inclined to continue to take profits in the jet-engine castings maker in the portfolio of our Best Ideas Newsletter. Our fair value estimate is unchanged. Revenue jumped 14% in Precision’s fiscal third-quarter thanks to strength across all of its product lines. Sales of its investment cast products jumped 8%, as aerospace demand continued at a nice pace. We’ll be looking for even stronger performance from its Investment Cast Products segment once production for the Boeing 787 ramps up considerably, likely … Read more

Precision Castparts Reports Strong Fiscal Second Quarter; Aerospace Growth Remains Impressive

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Precision Castparts (PCP) reported solid fiscal second-quarter results Thursday that showed strong sales and profit expansion. Though we liked the firm’s results, we’ll be looking to trim our position in our Best Ideas portfolio in the coming weeks, solely as a means of rebalancing our porfolio. Our fair value estimate remains unchanged. The metal casting-maker’s third-quarter revenue advanced 19% from the same period a year ago on the heels of strong growth from its Investment Cast Products, Forged Products, and Fastener Products segments, the latter jumping 27%. The company’s top-line was driven by accelerated commercial production rates, market share gains, and a number of acquisitions that closed in the quarter, the latter bolstering its exposure to the oil and gas … Read more

Precision Castparts Posts Strong Fiscal First Quarter Results

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Metal-bender and best idea, Precision Castparts (PCP) reported excellent fiscal first-quarter results Thursday that showed continued strength in the commercial aerospace end market and additional traction in industrial gas turbines (sales were up 15%) and its seamless pipe business (sales were up 28%). We think the name is still worthy of a position in our Best Ideas portfolio.   Precision’s sales jumped 16% in the quarter, and the firm was able to leverage that growth into a 19% year-over-year improvement in operating income. The company’s consolidated segment operating margin jumped to 25% from 24.3% in the year-ago period. We continue to believe Precision Castparts is a prime beneficiary of the strengthening build rates of commercial airplanes during the next few … Read more

How Profitable is Boeing’s 787 Dreamliner? Not Very.

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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

Our Case for Precision Castparts — Upside to $200 Per Share

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Precision Castparts has long been a favorite of ours. The firm’s investment cast products segment (about 34% of sales) makes the structural castings (metal blocks) and the rotating airfoils (blades) that form aircraft jet engines. Though a structural casting has a longer useful life, a jet engine’s airfoil components frequently need to be replaced upon maintenance (think razor, razor-blade model). The firm’s forged products (about 41% of sales) are used in landing gear, bulkheads, and other airframe components, while its fasteners (about 25% of sales) are used in such critical applications as wing-to-fuselage and engine-to-wing connections. Precision’s components are crucial to flight safety, particularly its metal castings, which preserve engine integrity during intense thermal conditions. Plus, and perhaps most important, Precision … Read more

Sorting Through the Aerospace Supply Chain

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273424-sorting-through-the-aerospace-supply-chain  As outlined in the previous two editions, The Future of the Narrowbody Market and How to Play the Upswing in Commercial Aerospace, expected deliveries of commercial planes are set to advance considerably in coming years. In this third edition, let’s dig into the valuation and potential upside of Precision Castparts (PCP), one of the best long-term plays on commercial aerospace demand. We’ll also dive into an interesting small-cap play and a compelling micro-cap opportunity in the aerospace supply chain. For new readers to this series of articles and analysis, let’s briefly review the trajectory of large commercial aircraft deliveries during the next several years. Aside from the fundamental drivers (replacement planes, … Read more

How to Play the Coming Upswing in Commercial Aerospace

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/272730-how-to-play-the-coming-upswing-in-commercial-aerospace In this, the follow up to our analysis of the narrowbody airplane market, let’s dive into just how robust the delivery upswing will be in commercial aerospace during the next few years and highlight a couple interesting, diversified ways to play the coming boom. We’ll also dive into one of the best aerospace names to own for the long haul, but leave open for Part III of this saga, an in-depth look at this firm’s valuation and the analysis of yet another intriguing play to capitalize on this multi-year cyclical upswing. First, let’s get a feel for what to expect from Boeing (BA) and Airbus during the next five years in terms of … Read more

Boeing Has Upside, Suppliers to Benefit From Boom

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With the first delivery and ramp up of Boeing’s (BA) revolutionary 787 Dreamliner, the reintroduction of its 747 platform, and rate increases on its workhorse 737 line, investors should expect a fairly significant ramp up in commercial aircraft deliveries, which remain supported by a massive backlog of unfulfilled orders. Impressively, Boeing’s commercial backlog of 3,400-plus planes is roughly 7x this year’s expected commercial revenue, in dollar terms. Needless to say, parts suppliers like Spirit Aerosystems (SPR), Precision Castparts (PCP), Rockwell Collins (COL), Goodrich (GR), Honeywell (HON), United Technologies (UTX) and a variety of others (including engine-makers like GE) will benefit from the coming boom in aerospace. Click to enlargeFurther, drawdowns in inventories, which have been a cumulative drag of over $15 billion … Read more

Boeing Declares Victory But Farnborough Disappoints

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Image Source: Boeing By Brian Nelson, CFA Nearly a decade ago, Boeing (BA) and Airbus (EADSY) made some big bets on the future. On one hand, Boeing envisioned a world of increasing point-to-point travel requiring wide-body aircraft with ultra-fuel efficient economics, laying the groundwork for the blueprint of the 787 Dreamliner, a mostly-composite aircraft. Airbus, on the other hand, had a different view of the future. The European plane maker believed that air travel would be dominated by the hub-and-spoke system where massive planes would be needed to transport passengers between global hubs. It decided to build the massive A380 superjumbo. If Boeing had not already declared victory, it can probably do so now. In mid-July, Airbus announced that it … Read more