Industry Week in Review – February 15, 2019

KippsDeSanto & Co. Industry Week in Review – February 15, 2019

Aerospace & Defense Update

On Friday, President Trump signed a spending bill to ensure the government remains open hours before funding for several agencies’ funding were scheduled to expire. Following the signing of the bill, President Trump declared the situation regarding the United States’ southern border a state of national emergency, which enables him to utilize military funding to construct border wall. White House officials intend to use $8 billion to fund the new wall to deter immigrants from illegally entering the country. Of the $8 billion, $1.375 billion was approved by Congress, 600 million would be drawn from the Treasury Department’s forfeiture funds account, $2.5 billion would be used from a Pentagon program for countering drug activities, and $3.6 billion would be transferred from military construction accounts.

This week, Airbus announced it has stopped production on its A380 Superjumbo aircraft, which was originally designed to compete with Boeing’s popular 787 Dreamliner aircraft. Despite the A380’s spacious design and quiet cabins, airlines have shifted towards more agile and fuel-efficient jets for both short-range and long-range travel. Emirates, the world’s largest airline in terms of international traffic, recently cut plans to buy several of the superjumbo Jets delivering the final blow to the program. Notwithstanding, withered demand for its A380 aircraft, Airbus’s shares rose 2.7% this week as the Company reported strong earnings rendered by soaring demand on its other jets and anticipates delivering 890 passenger jets this year, an 11% increase from the 800 delivered in 2018.

Government Technology Solutions

After announcing plans in mid-November to create a new corporate headquarters (“HQ2”) split between Long Island City, NY, and Crystal City, VA, Amazon (NASDAQ:AMZN) has abruptly abandoned its Long Island City headquarters plan after receiving opposition from activists and politicians. In a press release on Thursday, the Seattle-based tech firm stated that certain local politicians will “not work with us to build the type of relationships that are required to go forward with the project.” It is estimated that the decision will cost New York around 25,000 potential jobs and billions in incremental tax revenues. Amazon will now turn its focus to setting up the new Nashville, Tennessee “center of excellence” and Northern Virginia HQ2 location. There has been no definitive word yet on whether Amazon will increase and / or accelerate hiring goals at its new D.C. Metro headquarters in response to this week’s withdrawal from New York.

Big Movers

Bombardier (Up 21.4%) – Share prices were up this week following an announcement that the Company beat earnings expectations for 4Q18 propelled by strong demand for its business jets and aftermarket services.

Airbus (Up 10.5%) – Share prices were up this week following the Company’s announcement that year-over-year earnings and revenue increased 56% and 11% respectively, beating estimates. Despite halting production on its A380 aircraft, Airbus is experiencing strong demand for its other products and expects to deliver 890 aircraft’s in 2019, a 11% increase from 2018 levels.

Transactions

Applied Insight, LLC, a portfolio of the Acacia Group, announced its acquisition of Stratus Solutions, Inc. and Applied Technology Group. Stratus Solutions, a provider of security, infrastructure, and development operations solutions and services to government and commercial customers. Applied Technology Group is a provider of cross-platform software development tools and embedded components for building, connecting, and securing applications. Terms of the transactions were not disclosed.

FLIR Systems, Inc. has agreed to acquired Endeavor Robotics Holdings, Inc., a provider of battle-tested, tactical unmanned ground vehicles (UGVs) for the global military, public safety, and critical infrastructure markets. The deal is worth an estimated $385 million.

Perforce Software, Inc., a portfolio company of Clearlake Capital Group, L.P., has agreed to acquire Rogue Wave Software, Inc., a provider of cross-platform software development tools and embedded components for building, connecting, and securing applications. Terms of the transaction were not disclosed.

Safran S.A. has acquired the ElectroMechanical Systems Business from Collins Aerospace, a provider of pilot controls and electrical actuators for aircraft’s. Terms of the deal were not announced.

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