Industry Week in Review – July 25, 2014

Aerospace & Defense Update

This week, Bombardier Inc. unveiled plans to revamp its organizational structure as President and Chief Operating Officer of Bombardier Aerospace since 2008, Guy Hachey, stepped down.  Previously organized as two separate divisions, Aerospace and Transportation, Bombardier is attempting to re-define its business with a new structure, which will include four unique business segments: Transportation, Business Aircraft, Commercial Aircraft, and Aerostructures and Engineering Services.  Each department will begin reporting directly to Chief Executive Pierre Beaudoin effective immediately, while the more formal restructuring plan will be developed over the next few months so that complete implementation can be finalized by January 1, 2015.  The Company cited reduced costs, increased efficiency, and improved flexibility in meeting customer needs as the rationale behind the restructuring which is expected to shed up to 1,800 jobs.  Analysts have speculated about a potential spin-off of one of the businesses for cash or strategic direction as a possible motive behind the overhaul.  The outlined changes coincide with Bombardier’s preparation for the commercial launch of its CSeries aircraft, which will compete head-to-head with narrow-body twin-engine aircraft from Boeing and Airbus.  The launch of the CSeries has been plagued by setbacks, most recently involving a major engine failure that caused damage to a test plane.  However, the Company expects test flights to resume in the coming weeks.

Government Technology Solutions Update

On July 24th, House Speaker John Boehner announced that the House will pass a short-term continuing resolution to keep the government open in September, in order to avoid a government shutdown that would otherwise take place on the last day of September.  The House will return from their August recess on September 8th, and have 10 legislative days to pass the continuing resolution which would likely expire early in December.  The Senate is scheduled to be in session for 17 days in September, providing additional time to deal with a house-passed continuing resolution.

Big Movers

Tyler Technologies, Inc. (Up 11.5%) – Shares were up this week after the Company posted earnings for the second quarter.  The Company’s earnings per share of $0.52 beat analyst estimates by $0.07, and quarterly revenue of $124.4 million far surpassed consensus estimates of $117.5 million.

Precision Castparts Corp. (Down 9.6%) – Shares were down this week after the company released its quarterly earnings, missing both earnings per share and revenue projections.  The Company posted earnings per share of $3.32, missing consensus analyst estimates by $0.03, and posted revenue of $2.53 billion, just shy of the consensus estimate of $2.58 billion.

Relevant Transactions

World Fuel Services Corp. to acquire Colt International, Inc., a provider of fuel and aviation services for private aviation clients, corporate flight departments, and vendors around the world.  The deal is worth an estimated $176.2 million.

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