Aerospace and defense products and services supplier,
) reported fiscal third quarter 2014 (ending Feb 28, 2014)
earnings of 38 cents per share, down 17.4% from 46 cents earned
in the year-ago quarter. The reported figure missed the Zacks
Consensus Estimate of 50 cents by 24.0%.
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In the fiscal third quarter of 2014, consolidated sales were
$474.4 million, down 11.2% year over year and below the Zacks
Consensus Estimate of $534.0 million. The company's top line
declined due to lower contribution from its Aviation Services and
Technology Products segments.
In the reported quarter, Aviation Services' revenues of $367.8
million comprised 77.5% of total revenues. Segment revenues
declined 9.9% from the year-ago quarter.
The downtrend was due to lower landing gear revenue from the
adverse timing of gear removals and decline in MRO (Maintenance,
repair and operations) sales resulting from the completion of a
significant engineering service program in the second quarter of
fiscal year 2014. In addition, the company restructured a supply
chain management program to convert the "Time and material" based
contract into the "Power- by-the-Hour" program. This change
decreased the company's revenue as well as profitability during
the reported quarter.
The Technology Products segment contributed 22.5% to total
revenues in the quarter, corresponding to $106.6 million (down
4.8% year over year). The decrease was mainly due to lower
contribution from the mobility product business, partially offset
by sales growth in cargo system.
Cost of sales in the reported quarter decreased 10.9% year over
year to $395.7 million and represented 83.4% of total revenues.
Selling, general and administrative expense edged up 9.0% to
$45.6 million from the year-ago level. As a percentage of sales,
selling, general and administrative expenses stood at 9.6% this
quarter as against 8.0% in the year-ago quarter.
The company's operating margin decreased nominally to 7.1% in the
reported quarter from 7.2% in the year-ago comparable quarter.
In the fiscal third quarter 2014, cash and cash equivalents were
approximately $114.7 million, up from $75.3 million at fiscal
2013 end. Net property, plant and equipment were $336.0 million,
down from $361.7 million at the end of fiscal 2013. Total
outstanding debt was $714.4 million.
Cash flow from operations in third quarter fiscal 2014 was $10.3
million and free cash flow was $3.4 million. Capital expenditure
was $6.9 million while AAR paid cash dividends of $3.0 million in
the reported quarter.
As the company continues to face continued pressure in airlift
and MRO services, partly offset by supply chain efficiencies, it
lowered its top- and bottom-line forecast for fiscal 2014.
The company cut its earnings guidance for fiscal 2014 to the
range of $1.79-$1.82 per share from $1.95-$2.00 per share
projected earlier. Total revenues are expected in the band of
$2.0 billion to $2.05 billion compared its previous forecast of
$2.1 billion to $2.2 billion.
Currently, AAR Corp. has a Zacks Rank #3 (Hold). Players in the
aerospace and defense industry with a favorable Zacks Rank
Huntington Ingalls Industries, Inc.
). All of these stocks hold a Zacks Rank #1 (Strong Buy).