Industry Week in Review – April 26, 2019

KippsDeSanto & Co. Industry Week in Review – April 26, 2019

Industry Week in Review – April 26, 2019

Aerospace & Defense Update

Numerous aerospace and defense companies announced 1Q19 earnings this week. Lockheed Martin reported strong revenue and earnings. First quarter revenue for the aerospace giant was $14.3 billion, a 23% year-over-year (“YoY”) increase from 1Q18 and earnings were $1.7 billion for the quarter, increasing 47% from the same period in 2018. Strong performance from Lockheed’s missile and fire control systems division drove a significant amount of the growth. Following the announcement, Lockheed raised its 2019 sales projections to $57.5 billion. Additionally, General Dynamics surpassed earnings per share estimates by $0.12 (5.0%) and increased YoY revenue by 23%, driven by sales growth in all five of its key segments. However, The Company’s Information Technology, Combat Systems, and Aerospace divisions performed exceptionally well, increasing YoY revenue by 91%, 14%, and 23%, respectively.

The Federal Aviation Administration (“FAA”) approved Google’s sister company, Wing Aviation, to operate a fleet of unmanned aircraft to transport commercial goods. This clearance enables Wing Aviation to operate as a traditional cargo carrier and features several safeguards including pilot training programs, approved safety systems, and mandatory data collection systems. While the FAA’s decision only grants Wing Aviation access to operate its fleet in Blacksburg, Virginia, the adoption of unmanned vehicles is several years ahead of schedule as most industry experts did not anticipate the FAA approving commercial utilization of unmanned aircraft until 2021. Several other commercial companies, including Amazon, are pursuing similar approvals to deliver their products through unmanned aircraft.

Government Technology Solutions

Jacobs Engineering Group has announced that it will acquire KeyW Holding Corp. for $815 million – a 43% premium to KeyW’s closing price on April 18. KeyW CEO Bill Weber said, “This transaction will propel KeyW’s capabilities further and create new opportunities for research and development our customers need to enhance their national security and intelligence capabilities.” KeyW will significantly bolster Jacobs’ Intelligence, Surveillance and Reconnaissance (“ISR”) capabilities, giving it a larger footprint in the high-growth sector. The companies are aiming to close the merger by August 31.

Arlington Capital is rebranding its Integrity Applications Inc. platform, which has combined with Xebec Global and Dependable Global Solutions. The combined entity, which will be known as Centauri, will focus on cyber, space, defense and intelligence solutions for the national security market. Centauri CEO, Dave Dzaran said, “With IAI’s expertise in complex engineering, Xebec’s deep understanding of security threats and IAI and DGS’ strong cybersecurity talent, there is no doubt in my mind that we will be able to more fully address the scope of our customer needs as one company: Centauri.” Dzaran says the company will invest heavily in cutting-edge capabilities to provide superior solutions to the national security community.

Big Movers

KeyW (Up 43.8%) – Share prices were up this week following an announcement that Dallas-based Jacobs Engineering Group will acquire the Company for $815 million.

Bombardier (Down 15.0%) – Share prices were down this week following the Company cutting its 2019 revenue projection to $17 billion from $18 billion due to “…the timing of aircraft deliveries, foreign exchange headwinds and a slower production ramp-up at transportation,” according to CEO Alain Bellemare.

Transactions

Jacobs Engineering Group, Inc. has agreed to acquire the KeyW Holding Corporation, a provider of national security solutions to the intelligence, cyber, and counterterrorism communities in the U.S, in a definite merger agreement that joins KeyW with Atom Acquisition Sub, Inc., a newly created, wholly owned indirect subsidiary of Jacobs. The deal is worth an estimated $815 million.

Enlightenment Capital has acquired Trowbridge & Trowbridge, LLC, a provider of cloud engineering, cybersecurity, IT engineering, application development, and network engineering solutions to the federal government. Terms of the deal were not disclosed.

Chart National, L.P. has made an equity investment in Sequoia Holdings, Inc., a provider of products and services in the fields of optronic, telecommunications, information technology, and cybersecurity in the defense and civil sector. Terms of the deal were not disclosed.

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