Precision Castparts (PCP) Misses Q1 EPS by 13c, Lowers FY EPS Guidance

Precision Castparts (NYSE: PCP) reported Q1 EPS of $2.87, $0.13 worse than the analyst estimate of $3.00. Revenue for the quarter came in at $2.41 billion versus the consensus estimate of $2.51 billion.

Precision Castparts sees FY2015 EPS of $12.25-$13.15, versus prior guidance of $12.50-$13.40 and the consensus of $12.77. Precision Castparts sees FY2015 revenue of $10-10.4 million, versus the consensus of $10.20 million.

“Operationally, Investment Cast Products delivered solid performance, effectively leveraging volume growth into strong margin expansion versus the first quarter of fiscal 2015,” said Mark Donegan, chairman and chief executive officer of Precision Castparts Corp. “Industrial gas turbine and the next generation aircraft engines remain solid demand drivers for the segment. Forged Products has appropriately adjusted its cost structure to the demand realities of the oil & gas markets, and this quarter marks a first step in the process of recovering a higher level of performance compared to the fourth quarter of fiscal 2015. While Airframe Products had a slow start to the year, reflecting fastener demand timing and also a heavy new product development load to support contracted share gains and program ramps in our Aerostructures operations, we expect improved performance through this year. The demand load is in front of us and the Airframe Products team is laser-focused on delivering against that opportunity.

“We have adjusted our guidance for fiscal year 2016 to reflect the interest expense from our June bond issuance of $2 billion, a step that has prepared PCC’s balance sheet to act on the capital deployment actions we have outlined previously. Our view on our core operations and end markets for the year is unchanged, although we believe Airframe Products revenue growth is more likely to be at the lower end of our previously discussed range, reflecting the effort to balance the new development work with ongoing production. For oil and gas, our customers’ buying patterns remain depressed but consistent with our expectations, and we have already taken the necessary steps to right-size our operations for the current environment.

“On the capital deployment front, we spent $266 million on two tuck-in acquisitions and $232 million on share repurchases,” Donegan said. “We also announced that we have reached agreement to acquire Composites Horizons (CHI), a leading producer of high-temperature composite and ceramic matrix composite materials for the jet engine market, and Noranco, a machining operation that expands our capabilities in landing gear and engine components. With CHI in our portfolio, PCC will be positioned to answer our customer’s needs for a broader range of material solutions in the hot section of the engine. Our actions in the first quarter were consistent with our balanced capital deployment framework.”

For earnings history and earnings-related data on Precision Castparts (PCP) click here.

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