Boeing’s first quarter earnings release this week offered generally clear skies, with a strong tailwind from its commercial operations. The world’s largest aerospace / defense company delivered 161 aircraft in the first three months of 2014, decidedly trumping Airbus’ 141 deliveries in the same period. Boeing’s deliveries, which were up 18% year-over-year, were primarily made up of 115 deliveries of its re-engined 737 model. Additionally, 18 787 Dreamliners were delivered in the period. In comparison to the same period last year, only one 787 Dreamliner had been delivered following its highly-publicized battery problems. In its fiscal first quarter, Boeing Commercial Airplanes won 235 net orders, which ended with a backlog of more than 5,100 airplanes, valued at approximately $374 billion. The company’s total backlog rests at $440 billion, which is only a slight decrease from the beginning of the year and includes first quarter net orders of $19 billion. Boeing still expects to deliver between 715 to 725 jetliners this year, following a record 648 deliveries in 2013. Results from Boeing’s defense business, like those from its prime contractor competitors who also released earnings this week, were less sanguine. Revenue at Boeing’s defense business fell nearly 6% year-over-year, with future orders for some key programs, such as the venerable F/A-18, under intense scrutiny. Overall, the company’s expectations remain high, however, as it raised its 2014 profit outlook this week from a range between $7.00 and $7.20 to a range between $7.15 and $7.35, citing strong aircraft demand and positioning within the global defense, space, and security markets for the persistent optimism. Along with Boeing, four major aerospace companies – B/E Aerospace, Hexcel, Rockwell Collins, and United Technologies – all released earnings reports this week. Representative of the positive aerospace market environment, each company beat their consensus analyst earnings estimates.
While the effects of sequestration caused a decline in overall Federal contract spending in GFY13, according to a recent Bloomberg report, seven departments managed to increase contract spending, despite various budgetary headwinds. The seven departments included the Department of Homeland Security (+2.1% over GFY12), the Department of Health and Human Services (+4.6% over GFY12), the Department of Veterans Affairs (+5.3% over GFY12), the Department of Justice (+7.0% over GFY12), the Department of Housing and Urban Development (+9.5% over GFY12), the Department of the Treasury (+16.4% over GFY12), and the Department of Education (+27.0% over GFY12). The report’s findings point toward continued opportunities for government technology contractors serving priority markets such as Homeland Security, Health and Human Services, and Veterans Affairs.
Raytheon Co. (Down 5.2%) – Shares were down this week after the company’s 1Q14 earnings release reported quarter over quarter sales down 6.3%, with decreases across all four divisions. Raytheon reported the largest sales decline of the Defense Primes.
Nexter Systems to acquire Chemring Group plc’s MECAR SA, a provider of weapon systems and ammunitions for LAVs, tanks, and infantry. Nexter will pay approximately $232 million for the acquisition.
Sumitomo Bakelite Co. Ltd. to acquire H.I.G. Capital’s Vaupell, Inc., a provider of thermoplastic interior solutions to the commercial aerospace industry. Sumitomo Bakelite will pay $270 million for the acquisition.
Prospect Partners’ Velocity Aerospace Inc. acquired E.D.N. Aviation, Inc., a provider of multi-unit fabrication and engineering / design services for various aircraft panel components. Terms of the deal were not disclosed.
The Parsons Corporation acquired Secure Mission Solutions, a provider of security consulting solutions to the Department of Defense, Intelligence Community, and civilian agencies. Terms of the deal were not disclosed.
The SI Organization acquired the U.S. Services Division of QinetiQ, which provides technical services and solutions to customers in the global aerospace, defense, and security markets. The SI Organization will pay $165 million upfront for the acquisition, and will potentially pay an additional $50 million if certain targets are met over the near-term.
Jacobs Engineering Group acquired Verizon Federal Network Systems, a provider of network solutions to the Department of Defense and civilian agencies. Terms of the deal were not disclosed.
Flatirons Solutions acquired CORENA, a provider of document management and system integration solutions for the defense, aerospace, marine, and energy industries. Terms of the deal were not disclosed.
The Blackstone Group acquired a majority stake in Accuvant, a provider of services and solutions to help clients plan, build, and run successful security programs. Blackstone will pay approximately $230 million for the majority stake.