TIE

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

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

Best Idea Precision Castparts Buys Titanium Metals; We Like the Deal

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On Friday, Precision Castparts (click ticker for report: ) announced that it has entered into an agreement to buy Titanium Metals (click ticker for report: ) for $16.50 per share in cash, roughly in line with our fair value estimate. We’re huge fans of this deal and expect Precision Castparts to extract significant synergies, similar to what it was able to accomplish when it bought Special Metals in 2006. Precision Castparts’ CEO Mark Donegan is perhaps the best aerospace executive when it comes to integrating acquisitions and delivering value to shareholders. The tie-up provides Precision Castparts with valuable titanium capacity, and we think the deal helps Precision optimize its supply chain by giving it greater control of input costs via … Read more