Industry Week in Review – May 27, 2011
On Thursday, the U.S. House of Representatives passed the National Defense Authorization Act for 2012, which fully funds the Pentagon’s request of a $553 billion base defense budget and $118 billion to fund the wars in Iraq and Afghanistan. The House bill allows for the continued development of a second engine for the F-35 Joint Strike Fighter, and restricts the president’s ability to transfer detainees from Guantanamo Bay and reduce the U.S. nuclear weapon stockpile as part of the new START treaty with Russia. These measures are likely to make reconciliation with the Senate version very difficult and leave the bill vulnerable to a veto by the White House, which stated earlier in the week that the president’s senior advisors would recommend a veto if funding for an extra engine program were included.
Notes on some big movers:
Computer Sciences Corporation (Down 10.2%): Shares fell for the week as the Company announced that it expects FY12 revenue and EPS to be in the range of $16.5-$17.0 billion and $4.70-$4.80, respectively, while analysts were expecting the Company to report revenues of $16.5 billion and EPS of $5.17
Finmeccanica SpA (Down 7.6%): Shares fell for the week as Goldman Sachs noted that sales and earnings outlook over the next several years is “very challenging,” as planned Italian government cuts could impact the Company’s Aerospace and Defense Group, which derived 20% of its 2010 sales in Italy
HEICO Corporation (Up 7.0%): Shares rose for the week as the Company reported 2Q11 net income of $16.8 million, a 34% increase driven by its flight-support unit, and increased full-year estimates for net income growth to 20% (excludes the impact of additional acquisitions, if any)
Notes on some relevant transactions:
EnCore Composites Holdings, Inc. announced on Wednesday that it has agreed to acquire BAE System’ Composite Structures Business, a provider of complex, highly-engineered composite components and assemblies primarily used on commercial and defense aerospace platforms. The proposed sale is expected to close during the second or third quarter of 2011, and better aligns BAE Systems’ strategic objectives and business portfolio.