Precision Castparts Corp
) reported strong second quarter fiscal 2014 results with record
revenues and earnings per share from continuing operations. Net
income from operations increased 27.7% to $424 million in the
reported quarter from $332 million in the prior-year quarter.
The company reported earnings from continuing operations of
$2.90 per share, which beat the Zacks Consensus Estimate of $2.82
by 2.8%. Quarterly earnings were up 27.7% year over year from
$2.27 in the second quarter of fiscal 2013.
Revenues increased 22.6% year over year to $2,362 million from
$1,927 million in the prior-year quarter, primarily driven by
organic growth of 6%. The company reported strong revenue growth
in two of its three operating segments, which also contributed to
the top-line improvement. However, revenues were short of Zacks
Consensus Estimate of $2,365 million.
Investment Cast Products
revenues declined 0.6% to $608 million from $612 million reported
in the year-ago quarter. Revenues increased in the segment's
aerospace OEM (original equipment manufacturer) and spare sales
business that is associated with current commercial aircraft
production rates and future ramps in aircraft build schedules.
However, this was almost offset by negative impacts from
contractual pass-through pricing of about $3 million and a weak
performance of the company's jet and military spares businesses.
The segment's operating income increased 4.8% year over year.
revenues increased a robust 39% year over year to $1,061 million
compared with $762 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. In addition, the top-line
also benefited from opportunities based on commercial OEMs ramp
production and new aircraft and engine development programs.
Further, downhole casing for the oil and gas market continued to
show a robust shipping profile for the fourth quarter in a row.
The segment's operating income improved a considerable 65.4% year
revenues surged 25.3% year over year to $693 million compared
with $553 million in the year-ago quarter. During the quarter,
critical aerospace fasteners sales improved marginally due to the
sluggish build-rate of commercial aircrafts including Boeing 787.
However, the base aerostructures business surged 66% year over
year. The increase was primarily attributed to healthy returns
from the new acquisitions and a significant increase in organic
business. This is expected to accelerate in near future with more
acquisitions in the pipeline. The segment's operating income
increased 26.5% year over year.
Operating income surged 30% year over year to $649 million
from $498 million in the prior-year quarter. Gross margins during
the quarter increased 71 basis points (bps) year over year to
17.9%. Strong synergies from acquisitions drove the overall
profitability of the company. Profits were also driven by strong
contribution of commercial aerospace production and stable demand
for industrial gas turbine spares.
Exiting the quarter, Precision Castparts had a cash balance of
$269 million, a decrease of 3.9% from $280 million as on Mar 31,
As on Sep 29, 2013, Precision Castparts had total debt of
$3,558 million versus $3,807 billion as on Mar 31, 2013. The
company has a debt to capitalization ratio of 25.2% 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 $94 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 the demand
for it's interconnect pipe (for supplying coal to India and
China) to increase significantly in the next two years. The
company is also planning to introduce various new projects in the
next couple of years and they include improved retrofit designs
for the OEM business and mega downhole projects for the oil and
Precision Castparts currently has a Zacks Rank #4 (Sell).
Other stocks in the industry worth a look include
AO Smith Corp
). While AO Smith Corp and NSK both carry a Zacks Rank #1 (Buy),
Timken retains a Zacks Rank #2 (Buy).
SMITH (AO) CORP (AOS): Free Stock Analysis
NSK LTD -UN ADR (NPSKY): Get Free Report
PRECISION CASTP (PCP): Free Stock Analysis
TIMKEN CO (TKR): Free Stock Analysis Report
To read this article on Zacks.com click here.