Industry Week in Review – August 24, 2012

Mid-year earnings season for Aerospace & Defense has begun wrapping-up with nearly all major players reporting results.  In a subset of about 30 major companies, roughly 80% beat earnings expectations and very few missed earnings.  Despite beating expectations, several Aerospace companies such as B/E Aerospace, Hexcel, and SAFRAN kept FY2012 guidance unchanged due to a muted outlook of aftermarket growth for the year. 

Meanwhile, large aircraft OEM outlook from Boeing and Airbus remains positive after the companies reported strong year-over-year performance and optimistic full-year guidance.  In general, Defense companies continue to rely on cutting costs in times of flat revenue growth and a tightened procurement environment.  Furthermore, roughly two-thirds of Defense companies left unchanged or lowered full-year guidance given the lack of sequestration visibility.

Big Movers

Chemring Group Plc (Down 9.9%) – Shares dropped this week amid concerns that interested suitor The Carlyle Group may not materialize.  Last week, Chemring disclosed a “highly preliminary expression of interest” from The Carlyle Group.

Relevant Transactions

LORD Corporation to acquire MicroStrain, a manufacturer of micro-displacement sensors used in a number of sectors.  The company specializes in combining micro-sensors with embedded processors to autonomously track operational usage and to navigate and control unmanned systems.  Terms of the deal were not disclosed.

General Dynamics to acquire Fidelis Security Systems, a provider of cyber security tools that offer real-time network visibility, analysis, and control.  The acquisition expands GD’s ability to provide its customers with continuous monitoring solutions to prevent advanced threats.  Terms of the deal were not disclosed.

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