Aerospace and Defense:Weekly Surveillance,1/20/15 - 1/23/15
UTX announced that David Hess will return to the company as Senior VP,Aerospace Business Development. Hess previously served as president of Pratt& Whitney and of Hamilton Sundstrand. He will now work to strengthenrelationships with key aerospace customers and partners and support MikeDumais’ efforts to review the company’s portfolio on the Aerospace side andevaluate acquisition opportunities. The move follows the announcement of thedeparture of top Aerospace executive Alain Bellemare the prior week.
PCP reported Q3 EPS of $3.09, within the range management set when it preannouncedthe prior week. The Forged Products margin of 23.2% was down150 bps sequentially from a seasonally weak Q2 and we view the downwardtrend here as a key concern for estimates. PCP indicated that FY15 EPS shouldbe $12.80-12.90 and management plans to start giving annual EPS guidancebeginning with FY16 next quarter, which will include the key assumptionsunderlying the guidance. In addition, PCP withdrew its EPS target of $15.50-16.50 without post Timet capital deployment, acknowledging that EPS wouldnot reach this range even with post Timet capital deployment. We lowered ourFY15 EPS estimate by 10 cents to $12.90. We also lowered FY16 by 15 cents to$13.90 and FY17 by 10 cents to $15.85.
We updated our outlook for ATK’s Sporting Group, which will become anindependent entity named Vista Outdoor on Feb 9. We are now assuming FY15organic growth of -6%, a flat y/y organic profile in FY16 and 5% y/y organicgrowth in FY17 and FY18. From a margin perspective, we assume adeterioration in Sporting profitability from 13.8% in FY15 to 12.2% in FY16,which is comprised of 11.0% for the legacy business, 14.0% for Bushnell and16.0% for Savage. For FY17 and FY18, we’re assuming improvement in totalSporting margin to 13.3%. Please see our note published this morning foradditional detail.
COL reported Q1 EPS of $1.26, five cents ahead of our estimates with EBIT inline or slightly ahead of our estimates in all three businesses. Aftermarket salesgrew only 2% y/y but we had only been looking for 4% and COL maintainedguidance for high single digit growth this year. Cash flow was weak butmanagement attributed this to timing and raised cash from ops guidance by $25mn to $700-800 mn. COL also raised EPS guidance by 20 cents to $5.10-5.30for the R&D tax credit. We raised our FY15 estimate by 15 cents to $5.25 andmaintained our FY16 and FY17 estimates of $5.65 and $6.45, respectively.