Precision Castparts Corp
) first quarter 2014 earnings from continuing operations of $2.88
per share missed the Zacks Consensus Estimate of $2.90 by 0.7%.
However, quarterly earnings were up 22.6% year over year from
$2.35 in the first quarter of 2013.
Profits were primarily driven by strong contributions from
recent acquisitions, profits in commercial aerospace production
and stable demand for industrial gas turbine spares.
Revenues increased 20.4% year over year to $2.36 billion from
$1.96 billion in the prior-year quarter, primarily driven by
accretive acquisitions in the recent past. The company reported
strong revenue growth in two of its three operating segments,
which also contributed to the top-line growth. However, revenues
were below the Zacks Consensus Estimate of $2.5 billion.
Investment Cast Products
revenues declined 0.6% from year-ago quarter to $616 million.
Revenue growth was driven by the segment's aerospace OEM business
that is associated with current commercial aircraft production
rates and future ramps in aircraft build schedules. However, this
was almost fully offset by negative impacts from contractual
pass-through pricing of about $2 million and union activity in
one of the company's facility of approximately $12 million.
revenues surged 24.9% year over year to $1.06 billion. The robust
increase in revenues was driven primarily by the Timet
acquisition, which was the largest driver of the sales growth in
the first quarter.
In addition, the top line also benefited from the upside
opportunities as commercial OEMs ramp production and new aircraft
and engine development programs progress. Further, downhole
casing for the oil and gas market continued to show a robust
shipping profile for the third quarter in a row.
revenues increased a robust 39.1% year over year to $686 million.
During the quarter, critical aerospace fasteners sales surged by
about 12% year over year. This is primarily attributable to the
Boeing 787 program, where the segment's fastener plants are
supplying at an average pace of approximately five shipsets in a
Further, the base aerostructures business grew 5% year over
year and follows the current commercial OEM build rates.
Therefore, this is expected to accelerate in line with further
ramp-ups in aircraft schedules.
Operating income surged 21.6% year over year to $625 million
in the reported quarter. This represents an increase from $514
million in the comparable prior-year quarter. Gross margins
during the quarter increased 38 basis points (bps) to 33.7% from
32.3% in the comparable prior-year period. Operating margin
during the reported quarter was 26.4% compared with 26.1% in the
comparable prior-year quarter. Strong synergies from the
company's acquisitions drove the overall profitability of the
Exiting the quarter, Precision Castparts had a cash balance of
$293 million, which was up 4.6% from $280 million as on Mar 31,
2013. The increase is attributable to efficient working capital
As on Mar 31, 2013, Precision Castparts had total debt of $3.3
billion versus $3.8 billion as on Mar 31, 2013. The company has a
debt to capitalization ratio of 25.0% versus 28.0% as on Mar 31,
2013. Despite major acquisitions, the company has managed its
debt well. Total capital expenditure incurred by the company in
the quarter amounted to $82 million.
Concurrent with the earnings release, the company provided an
outlook for the rest of fiscal 2014. Base commercial aerospace is
expected to grow in the coming 12 to 14 months, driven primarily
by the Boeing 787 ramp up.
Furthermore, Industrial Gas Turbines IGT is also showing good
momentum in its aftermarket backlog as the company is shipping
out large quantities of nickel-based, severe service tubular
product over the upcoming four quarters. The company expects its
major end markets to drive organic growth.
Precision Castparts currently has a Zacks Rank #2 (Buy). Other
stocks in the same industry worth a look are
AO Smith Corp
Plug Power Inc.
Micheal Baker Corp.
). All three carry a Zacks Rank #2 (Buy).
SMITH (AO) CORP (AOS): Free Stock Analysis
BAKER (MICHAEL) (BKR): Free Stock Analysis
PRECISION CASTP (PCP): Free Stock Analysis
PLUG POWER INC (PLUG): Free Stock Analysis
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