Precision Castparts Corp
) reported third-quarter fiscal 2014 results with strong revenues
and earnings per share from continuing operations. Net income
from operations increased 27.4% to $432 million in the reported
quarter from $339 million in the prior-year quarter.
The company reported earnings from continuing operations of
$2.95 per share, which missed the Zacks Consensus Estimate of
$3.04 by 3.1%. However, year-over-year quarterly earnings were up
27.7% from $2.31in the third quarter of fiscal 2013.
Revenues increased 15.9% year over year to $2.3 million from
$2.0 billion in the prior-year quarter, primarily driven by
organic growth of 1%. The company reported strong revenue growth
in two of its three operating segments, which also contributed to
the top-line improvement. Revenues surpassed the Zacks Consensus
Estimate of $2.5 billion.
Investment Cast Products
revenues declined 0.6% to $609 million from $613 million reported
in the year-ago quarter. Revenues increased in the segment's
aerospace OEM (original equipment manufacturer) and spare sales
business. The latter is associated with current commercial
aircraft production rates and future ramps in aircraft build
However, the growth was almost offset by negative impacts of
contractual pass-through pricing of about $2 million and weak
performances of the company's jet and military spares businesses.
The segment's operating income increased 4.3% year over year.
revenues increased 23.2% year over year to $1,026 million
compared with $833 million in the year-earlier quarter. The
robust increase in revenues was driven primarily by the segment's
strong performance in the aerospace and power sectors. Also,
revenues from the acquisitions of Timet and Texas Honing added to
the top-line growth of the segment.
Further, Aerospace sales increased by approximately 32% year
over year, driven primarily by TIMET, with stable base sales. The
segment also continues to progress well in power markets.
Interconnect pipe sales grew by approximately 52% year over year,
with a backlog now standing at nearly one year.
All these were offset by decline in sales to the oil & gas
market, which declined slightly in the third quarter of fiscal
2014, compared to very rapid growth in the same quarter a year
ago. The segment's operating income improved a considerable 51%
year over year.
revenues surged 22.8% year over year to $722 million, compared
with $588 million in the year-ago quarter. During the quarter,
critical aerospace fastener sales improved marginally due to the
sluggish build rate of commercial aircrafts, including Boeing
The aerospace business surged 27% year over year. The increase
was primarily attributed to healthy returns from new acquisitions
and significant growth in the company's organic business. The
rise is expected to accelerate in near future with more
acquisitions in the pipeline. The segment's operating income
increased 29.9% year over year.
Operating income surged 26% year over year to $640 million,
from $508 million in the prior-year quarter. Gross margins during
the quarter contracted 224 basis points (bps) year over year to
65.7%, while operating margin increased 217 bps to 27.2% driven
by strong synergies from acquisitions. Profits were also driven
by a strong contribution from commercial aerospace production and
a stable demand for industrial gas turbine spares.
Exiting the quarter, Precision Castparts had a cash balance of
$337 million, an increase of 20.4% from $280 million as on Mar
As on Dec 29, 2013, Precision Castparts had a total debt of
$3,622 million versus $3,807 billion as on Mar 31, 2013. The
company has a debt to capitalization ratio of 24.7% 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 aggregated $85 million.
Concurrent with the earnings release, the company provided a
positive outlook going forward. The company's business in
Industrial Gas Turbines (IGT) is showing good momentum in the
aftermarket services, driven by the increased demand for
turbine-based power generators.
The company expects demand for its interconnect pipe (for
supplying coal to India and China) to increase significantly in
the next two years. In the next couple of years, the
company is also planning to introduce various new projects, like,
improved retrofit designs for the OEM business and mega downhole
projects for the oil and gas industry.
Precision Castparts currently holds a Zacks Rank #3 (Hold).
Other stocks in the industry that are worth a look include
Worthington Industries, Inc.
) carrying aZacks Rank #1 (Strong Buy),
Century Aluminium Co.
CIRCOR International, Inc
) both carrying a Zacks Rank #2 (Buy).
CENTURY ALUM CO (CENX): Free Stock Analysis
CIRCOR INTL (CIR): Free Stock Analysis Report
PRECISION CASTP (PCP): Free Stock Analysis
WORTHINGTON IND (WOR): Free Stock Analysis
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