GR Goodrich Corp. (The)

Before markets opened, Goodrich Corporation (GR) announced mixed third quarter 2011 results. In the reported quarter, the company clocked adjusted earnings of $1.70 per share, striding ahead of the Zacks Consensus Estimate of $1.50 and showing an improvement from $1.25 per share earned a year ago.

On a reported basis, after including merger-related costs of 13 cents, the company clocked earnings of $1.57 versus $1.25 in the year-ago period. The merger-related costs were related to the ongoing merger deal with United Technologies Corp. (UTX).

Earlier, in September 2011, United Technologies announced that it would acquire Goodrich for $18.4 billion, including the assumption of $1.9 billion in debt. The deal is expected to close in mid-2012.

Operational Statistics

Goodrich's revenue in the reported quarter grew 16.3% year over year to $2.03 billion, falling behind the Zacks Consensus Estimate of $2.07 billion. Operating margin for the third quarter was 19.3% versus 17.3% in the year-ago quarter. The company reported net income of $201 million versus $160 million in the year-ago quarter.

Segment Details

Actuation and Landing Systems: In the reported quarter, revenue rose 16% to $733.0 million from $631.1 million in the year-ago quarter. The segment’s operating income of $97.1 million increased 22% from $79.5 million in the third quarter 2010. Operating margin rose to 13.2% from 12.6% in the year-ago quarter.

Nacelles and Interior Systems: In the reported quarter, revenue rose 21% to $705.1 million from $582.7 million in the year-ago quarter. Segmental operating income shot up 40% to $191.1 million from $136.8 million in the year-ago quarter. Operating margin also rose to 27.1% from 23.5% in the year-ago quarter.

Electronic Systems: In the reported quarter, revenue rose 11% to $594.5 million from $534.2 million in the year-ago quarter. Segmental operating income climbed 21% to $104.7 million from $86.3 million in the year-ago quarter. Operating margin increased to 17.6% from 16.2% in the year-ago quarter.

Financial Update

Goodrich ended the reported quarter with cash and cash equivalents of $571.8 million versus $798.9 million at fiscal-end 2010. Long-term debt and capital lease obligations at the end of the reported period rose by $38.9 million from fiscal-end 2010 to $2.4 billion. Net cash provided by operating activities during the third quarter 2011 was $247.8 million, reflecting a decrease of $4.6 million from the comparable period in 2010.

Outlook

Looking forward, Goodrich expects large commercial airplane original equipment sales to increase about 15% in 2011. The bullishness stems from the company’s major customer The Boeing Company’s (BA) announcement to raise production rates for its 787 and 747-8 series of airlines. Other important programs supporting the strong growth are Airbus’s A350 XWB and A320neo series airplanes, Canadian Conglomerate Bombardier Inc.’s CSeries and Japanese aircraft manufacturer Mitsubishi Aircraft Corporation’s Mitsubishi Regional Jet aircraft programs.

Overall, Goodrich expects regional, business and general aviation airplane original equipment sales in 2011 to grow roughly 40%, of which about 20% is expected to be organic. Large commercial, regional, business and general aviation airplane aftermarket sales are expected to increase by about 13% and defense and space sales of both original equipment and aftermarket products and services are expected to increase in the range of 13%–15%.

Goodrich reaffirmed its revenue guidance for 2011 in the neighborhood of $8.1 billion. Goodrich expects 2011 capital expenditures in the range of $300 million to $350 million.

Goodrich raised its 2011 net income per share guidance range to $5.90–$6.00 from its prior outlook of $5.85–$6.00.

Goodrich currently retains a Zacks #3 Rank (Hold rating), which is supported by our longer-term Neutral recommendation.

 

 
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