Precision Castparts Corp. fell short of Wall Street expectations
for earnings and revenue in its quarter ended June, with profit
sliding 17.4% during the three-month period amid falling demand for
oil, metal prices and a choppy aerospace market.
"For oil and gas, our customers' buying patterns remain
depressed," said Mark Donegan, chief executive officer of
Precision.
The maker of industrial components and commercial airplane parts
said it was adjusting its guidance for its current fiscal year to
reflect the interest expense from its June bond issuance of $2
billion. The company now expects per-share earnings to fall between
an adjusted range of $12.25 and $13.15 with revenue between $10
billion and $10.4 billion. The Oregon-based company's previous
prediction saw per-share earnings of $12.50 to $13.40.
"Our view on our core operations and end markets for the year is
unchanged," Mr. Donegan said. "Although we believe airframe
products revenue growth is more likely to be at the lower end of
our previously discussed range, reflecting the effort to balance
the new development work with ongoing production." He added that
the company spent some $232 million on repurchased stock for the
quarter.
Sales in the forged products segment declined 8%, including a
negative impact of $25 million linked to metal prices and
contractual pass-through pricing.
Commercial aerospace sales increased 6% during the quarter
compared with the same period a year earlier, while military
shipments were down 15%, reflecting weaker demand for components.
But power sales tumbled some 33%, mostly due to lower oil, gas and
pipe demand, the company reported.
Precision has generated about a quarter of its sales from the
energy and power markets in recent years. Like other aerospace and
defense companies, it targeted the oil-and-gas sector as a growth
market. But the strategy left the company exposed to the recent
tumble in oil prices. Precision results have also been hurt lately
by currency volatility.
Overall, Precision reported a profit of $399 million, or $2.87 a
share, down from $483 million, or $3.31 a share, a year earlier.
Revenue dipped 4.3% to $2.41 billion from $2.52 billion.
Analysts polled by Thomson Reuters expected earnings of $3 a
share and revenue of $2.5 billion.
On Monday, the company announced that it had reached a deal to
acquire the Noranco business from MidOcean Partners and PSP
investments for $560 million, adding capabilities in the aircraft
sector.
Noranco' s largest customers include Honeywell International
Inc., Safran SA, Bombardier Inc., and Spirit AeroSystems Holdings
Inc.
Noranco will become part of Precision Castparts' airframe
products business.
Shares of the company were inactive premarket.
Write to Ezequiel Minaya at ezequiel.minaya@wsj.com
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