Industry Week in Review – March 11, 2011
U.S. markets fell for the week with the Dow and S&P falling more than 1% and the NASDAQ falling almost 2.5%, as investors remained concerned over the impact of the natural disasters that devastated Japan and the ongoing civil war in Libya and planned anti-government protests in Saudi Arabia. Concerns around the DoD’s accounting practices made news this week as the Treasury Department’s assistant secretary, Richard Gregg, told a Congressional panel that there were “serious financial reporting issues” at the Pentagon. Gregg’s statements came after the U.S. General Accounting Office reported that the problematic defense accounting standards were the main reason for why it was unable to produce a full assessment of FY2010 government spending. The DoD’s acquisition process also came under scrutiny this week as top Defense officials and lawmakers decried the lengthy system in place to develop and field new weapons. The Expeditionary Fighting Vehicle program, canceled after several decades of continued development, was cited as a clear example of the broken process. Albeit a small change, the Pentagon did sign off on a policy change last month to eliminate a program manager’s contribution to a report required after a program is deemed fit to enter production. This move is in line with the Better Buyer Power initiative, which is an effort to reduce weapon procurement costs by setting realistic requirements and shortening acquisition schedules.
Notes on some big movers:
- AeroVironment, Inc. (Up 15.7%): Shares spiked Wednesday as the Company announced its 3Q11 earnings; Revenue was $84.4 million, up 39% from 3Q10 revenue of $60.9 million, as a result of higher sales in Unmanned Aircraft Systems segment of $16.6 million and Efficient Energy Systems segment of $6.9 million; The Company also increased its FY2011 guidance to revenue growth of 12.5%-15%, which is the upper half of its prior guidance range
- Ceradyne Inc. (Up 16.7%): Shares rose sharply Wednesday as the Company raised its FY2011 EPS and revenue guidance to a range of $2.35-$2.70 and $505 million-$560 million, respectively; The Company recently received a $56.6 million ESAPI award and several potential additional armor opportunities to increase the probability of a substantial increase in its military business, is encouraged by the preliminary ballistic results the military is achieving for its Enhanced Combat Helmet first article testing, and is projecting an increased industrial ceramic business in Europe and strong demand for high purity fused silica ceramic solar crucibles; The Company also announced on Thursday that it acquired a minority interest in Yamanaka EP Corporation, a processor of advanced technical materials for nuclear power plant, solar, optical fiber, and semiconductor applications
- Federal Signal Corporation (Down 10.6%): Shares fell for the week following the broader market trend; The Company is scheduled to announce its 4Q10 earnings before the market opens on Tuesday, March 15th
- LMI Aerospace Inc. (Up 9.0%): Shares rose significantly on Friday as the Company announced its 4Q10 and full-year 2010 earnings; Full-year 2010 sales reached $223.4 million and are expected to increase to the range of $259 million-$271 million for FY2011 as the Engineering Services segment should benefit from Boeing’s recent award to build the tanker aircraft; The company is hiring within both the Aerostructures and Engineering Services business segments to support expected growth
- CPI Aerostructures Inc. (Down 9.2%): Shares fell for the week as the Company announced its 4Q10 and full-year 2010 earnings; 4Q10 revenues fell from $12.7 million in 2009 to $7.5 million, resulting from the termination of the T-38 Talon jet trainer aircraft program one year earlier than expected, which caused revenue growth for the year to be flat
No relevant transactions this week.