Sponsored by SPX CommTech (TCI & ECS)
26 Oct 23. Oshkosh Corporation Reports Fiscal 2023 Third Quarter Results. Oshkosh Corporation (NYSE: OSK), a leading innovator of purpose-built vehicles and equipment, today reported fiscal 2023 third quarter net income of $183.7m, or $2.79 per diluted share, compared to net income of $66.9m, or $1.02 per diluted share, for the third quarter of fiscal 2022. Adjusted1 net income was $200.6m, or $3.04 per diluted share, for the third quarter of fiscal 2023 compared to $75.9m, or $1.15 per diluted share, for the third quarter of fiscal 2022. Comparisons in this news release are to the third quarter of fiscal 2022, unless otherwise noted.
Adjusted1 net income for the third quarter of fiscal 2023 excludes acquisition-related costs, amortization of purchased intangibles, a gain on the sale of a business and a loss on the sale of an equity method investment. Adjusted1 net income for the third quarter of fiscal 2022 excludes amortization of purchased intangibles, charges for the release of cumulative translation adjustment losses upon the liquidation of foreign entities and an impairment of an intangible asset. In connection with the purchase of JBT AeroTech (AeroTech), which was consummated August 1, 2023, amortization of purchased intangibles is now being excluded from adjusted results for all periods.
Consolidated sales in the third quarter of fiscal 2023 increased 21.4 percent to $2.51bn primarily due to higher sales volume, the inclusion of $135m of sales related to acquisitions and improved pricing.
Consolidated operating income in the third quarter of fiscal 2023 increased 118.9 percent to $256.5m, or 10.2 percent of sales, compared to $117.2m, or 5.7 percent of sales, in the third quarter of fiscal 2022. The increase was primarily due to improved pricing, higher sales volume and improved mix, offset in part by higher incentive compensation costs. Adjusted1 operating income in the third quarter of fiscal 2023 was $276.3m, or 11.0 percent of sales, compared to $126.9m, or 6.1 percent of sales, in the third quarter of fiscal 2022.
“We are pleased to report another quarter of strong performance highlighted by revenue growth of 21.4 percent, leading to an 11.0 percent consolidated adjusted operating margin and adjusted earnings per share of $3.04 in the third quarter,” said John Pfeifer, president and chief executive officer of Oshkosh Corporation. “Our performance, highlighted by outstanding revenue and earnings growth, was driven by the benefits of supply chain and operational actions across the company over the past several quarters. Orders were solid in the quarter across all businesses, including our Access segment, and reinforce our positive outlook for 2024. In summary, our investments in operations and product technologies are paying off as we transition to a more resilient business.
“We are also pleased with performance improvements in our Vocational segment and the progress on our AeroTech integration. We are confident in AeroTech’s technology, product offerings and secular growth opportunities in the air cargo and air travel support businesses.
“We announced several key electric vehicle contracts in our Vocational segment during the quarter, including Striker Volterra ARFF orders for the new airport under construction in Sydney, Australia and longtime customer Dallas Fort Worth International Airport. We also announced an order for 50 McNeilus Volterra ZSL units, North America’s first fully integrated, zero emission electric refuse collection vehicle. With our technology leadership and strong product offerings, we are confident in the outlook for electric vehicles and the profitable growth they will drive for our company.
“As a result of our strong third quarter performance and our positive outlook, we are increasing our expectations for 2023 earnings per share to be in a range of $8.75 and 2023 adjusted earnings per share to be in a range of $9.50. With our strong backlogs, leading technologies, positive market sentiment and the strength of our people, we are well positioned for 2024 and beyond,” added Pfeifer.
Factors affecting third quarter results for the Company’s business segments included:
Access – Access segment sales for the third quarter of fiscal 2023 increased 27.0 percent to $1.32bn as a result of improved sales volume, higher pricing in response to higher input costs and the inclusion of sales of $19.0 m related to the Hinowa acquisition.
Access segment operating income in the third quarter of fiscal 2023 increased 93.5 percent to $229.9m, or 17.4 percent of sales, compared to $118.8m, or 11.4 percent of sales, in the third quarter of fiscal 2022. The increase was primarily due to higher sales volume, improved price/cost dynamics and improved product mix, offset in part by higher incentive compensation costs and increased operating expenses to support the higher sales levels.
Adjusted1 operating income in the third quarter of fiscal 2023 was $231.8m, or 17.6 percent of sales, compared to $123.5m, or 11.9 percent of sales, in the third quarter of fiscal 2022.
Defense – Defense segment sales for the third quarter of fiscal 2023 decreased 3.6 percent to $500.1m primarily due to lower Joint Light Tactical Vehicle program volume offset in part by higher Family of Medium Tactical Vehicle sales volume.
Defense segment operating income in the third quarter of fiscal 2023 increased 635.5 percent to $22.8m, or 4.6 percent of sales, compared to $3.1m, or 0.6 percent of sales, in the third quarter of fiscal 2022. The increase was due to unfavorable cumulative catch-up adjustments on contract margins in the third quarter of 2022 and a gain on the sale of a business.
Adjusted1 operating income in the third quarter of fiscal 2023 was $16.1m, or 3.2 percent of sales, compared to $4.6m, or 0.9 percent of sales, in the third quarter of fiscal 2022.
Vocational – Vocational segment sales for the third quarter of fiscal 2023 increased 35.4 percent to $692.6m due to the inclusion of sales related to the AeroTech acquisition, improved sales volume and higher pricing in response to higher input costs, offset in part by the sale of the rear discharge mixer business. AeroTech had sales of $115.8m from the August 1, 2023 acquisition date to September 30, 2023.
Vocational segment operating income in the third quarter of fiscal 2023 increased 63.6 percent to $52.5m, or 7.6 percent of sales, compared to $32.1m, or 6.3 percent of sales, in the third quarter of fiscal 2022. The increase was primarily due to improved price/cost dynamics, improved mix and higher sales volume, offset in part by acquisition costs, the amortization of inventory fair value step-up and higher amortization of purchased intangibles related to the AeroTech acquisition.
Adjusted1 operating income in the third quarter of fiscal 2023 was $77.1m, or 11.1 percent of sales, compared to $35.6 m, or 7.0 percent of sales, in the third quarter of fiscal 2022.
Corporate – Corporate costs in the third quarter of fiscal 2023 increased $11.9m to $48.7m due to higher incentive compensation, stock-based compensation and engineering costs.
Interest Expense Net of Interest Income – Interest expense net of interest income in the third quarter of fiscal 2023 increased $6.8m to $17.7m due to increased borrowings related to the acquisition of AeroTech.
Provision for Income Taxes – The Company recorded income tax expense in the third quarter of fiscal 2023 of $55.3m, or 22.9 percent of pre-tax income, compared to $32.2m, or 32.4 percent of pre-tax income, in the third quarter of fiscal 2022. Income tax expense in the third quarter of fiscal 2022 was elevated due to an anti-hybrid tax matter in a foreign jurisdiction that was resolved in the fourth quarter of fiscal 2022.
The Company reported net sales for the first nine months of fiscal 2023 of $7.19bn and net income of $447.2m, or $6.80 per diluted share. This compares with net sales of $6.08bn and net income of $98.8m, or $1.49 per diluted share, for the first nine months of fiscal 2022. The increase in net income for the first nine months of fiscal 2023 was the result of improved price/cost dynamics, higher sales volume, improved product mix and the absence of a charge of $18.1m associated with foreign anti-hybrid tax legislation due to comments made by taxing authorities of the applicable jurisdiction during the first quarter of fiscal 2022, offset in part by higher incentive compensation costs, higher operating expenses and AeroTech-related acquisition expenses, including acquisition costs of $12.9m, amortization of purchased intangibles of $6.2m and amortization of inventory fair value step-up of $6.2m.
Adjusted1 net income for the first nine months of fiscal 2023 was $487.8m, or $7.41 per diluted share, compared to $130.2m, or $1.96 per diluted share in the first nine months of fiscal 2022.
Fiscal 2023 Expectations
The Company expects its fiscal 2023 diluted earnings per share to be in the range of $8.75 and adjusted1 earnings per share to be in a range of $9.50 on projected net sales in the range of $9.65bn. These expectations compare to previous estimates of diluted earnings per share of $7.65 and adjusted1 earnings per share of $8.00 on projected net sales of $9.5bn. Excluding amortization of purchased intangibles had the effect of increasing estimated adjusted1 earnings per share by approximately $0.35, net of tax, compared to previous estimates.
The Company’s Board of Directors today declared a quarterly cash dividend of $0.41 per share of Common Stock. The dividend will be payable on November 27, 2023 to shareholders of record as of November 13, 2023. (Source: BUSINESS WIRE)
26 Oct 23. Textron raises profit forecast on private jets demand, but supply chain a challenge. Textron (TXT.N) on Thursday beat analyst estimates for quarterly profit on sustained orders for its private jets, but supply chain problems continue to weigh on deliveries.
The parent of Cessna business jets also raised its full-year adjusted earnings forecast and expects full-year adjusted profit per share of between $5.45 and $5.55, above its previous expectation of $5.20 to $5.30.
Shares of the owner of Bell Helicopters rose 1.8% in early market trading.
Demand for business jets remains resilient, with planemakers raising prices to counter costs, after more wealthy travelers sought to fly privately during the pandemic due to public health fears. Economic headwinds and higher interest rates, however, remain concerns for future orders.
Overall quarterly revenue of $3.34bn missed analysts’ estimate of $3.48bn, as per LSEG data.
Textron Aviation delivered 39 jets, fewer than two analysts expected, during the three months ending Sept. 30.
Textron, which expects to deliver in the neighborhood of 175 to 180 private jets for the full year, anticipates higher deliveries in 2024 when supply chain problems should improve.
Textron CEO Scott Donnelly told analysts he is already seeing improvements with fewer parts overall arriving late, but delays remain a problem.
“If you’re missing parts for (an) aircraft,.. you still can’t deliver that aircraft,” he said on a call.
Orders at the aviation unit, Textron’s most profitable business, rose 12%, marking the strongest order quarter of the year, the company said on Thursday.
In September, Textron and NetJets signed an agreement, which analysts value at about $30 bn, giving the private jet firm owned by Berkshire Hathaway (BRKa.N) the option to buy up to 1,500 additional Cessna Citation business jets over the next 15 years.
Revenue at Textron Aviation rose 14.7% to $1.34bn.
On an adjusted basis, the company earned $1.49 per share, higher than the estimate of $1.29.
26 Oct 23. Textron Reports Third Quarter 2023 Results; Raises Full-Year EPS Outlook.
- EPS of $1.35; adjusted EPS of $1.49, up 30% from a year ago
- $235 m returned to shareholders through share repurchases in the third quarter
- Full-year adjusted EPS outlook raised to $5.45 – $5.55
Textron Inc. (NYSE: TXT) today reported third quarter 2023 income from continuing operations of $1.35 per share, as compared to $1.06 per share in the third quarter of 2022. Adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $1.49 per share for the third quarter of 2023, compared to $1.15 per share in the third quarter of 2022.
“In the quarter, we saw higher overall revenues and net operating profit driven by growth at Aviation, Industrial and Systems,” said Textron Chairman and CEO, Scott C. Donnelly. “At Aviation, we saw our strongest order quarter of the year with a 12% increase over the third quarter of 2022.”
Net cash provided by operating activities of the manufacturing group for the third quarter was $270m, compared to $356m last year. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, totaled $205m for the third quarter, compared to $292m last year.
In the quarter, Textron returned $235m to shareholders through share repurchases. Year to date, Textron has returned $885m to shareholders through share repurchases.
Textron now expects 2023 adjusted earnings per share from continuing operations to be in a range of $5.45 to $5.55, up from our previous outlook of $5.20 to $5.30. Textron reiterated its expectation for manufacturing cash flow before pension contributions of $0.9 bn to $1.0 bn, with planned pension contributions of about $50 m.
Third Quarter Segment Results
Textron Aviation’s revenues were $1.3bn, up $171m from last year’s third quarter, reflecting higher volume and mix of $89 m and higher pricing of $82m.
Textron Aviation delivered 39 jets in the quarter, flat with last year, and 38 commercial turboprops, up from 33 in last year’s third quarter.
Segment profit was $160m in the third quarter, up $29m from a year ago, largely due to favorable pricing, net of inflation, of $39m and a $23m favorable impact from higher volume and mix, partially offset by an unfavorable impact from performance of $33m, largely related to supply chain and labor inefficiencies.
Textron Aviation backlog at the end of the third quarter was $7.4bn.
Bell revenues in the quarter were $754m, flat with the third quarter of 2022, with lower commercial helicopter volume, largely reflecting supply chain constraints, partially offset by higher military volume.
Bell delivered 23 commercial helicopters in the quarter, down from 49 last year.
Segment profit of $77m was up $3m from last year’s third quarter, primarily due to a favorable impact from performance of $23m, largely reflecting lower research and development costs, partially offset by lower volume and mix of $16m.
Bell backlog at the end of the third quarter was $5.2bn.
Revenues at Textron Systems were $309m, up $17m from last year’s third quarter, largely reflecting higher volume.
Segment profit of $41m was up $10m, compared with the third quarter of 2022, primarily due to a favorable impact from performance of $8m.
Textron Systems’ backlog at the end of the third quarter was $2.0bn.
Industrial revenues were $922m, up $73m from last year’s third quarter, largely due to higher volume and mix of $45m at both product lines and an $18m favorable impact from pricing, principally in the Specialized Vehicles product line.
Segment profit of $51m was up $15m from the third quarter of 2022, largely due to a favorable impact from pricing, net of inflation, of $15m, principally in the Specialized Vehicles product line, and higher volume and mix of $8m, partially offset by an unfavorable impact of $10m from performance.
Textron eAviation segment revenues were $7m and segment loss was $19m in the third quarter of 2023, primarily related to research and development costs.
Finance segment revenues were $13m, and profit was $22m,up $15 m from last year’s third quarter largely due to a recovery of amounts that were previously written off related to one customer relationship. (Source: BUSINESS WIRE)
27 Oct 23. Safran posts Q3 revenues up 26%, reaffirms key targets. France’s Safran (SAF.PA) on Friday posted 26% higher underlying third-quarter revenues and reaffirmed full-year financial targets.
The jet engine and equipment maker said quarterly revenues rose 20.1% – or 25.9% on a like-for-like basis – to 5.825bn euros, led by core propulsion revenues and buoyed by refurbishment projects at its Aircraft Interiors division.
Safran co-produces LEAP jet engines for Boeing (BA.N) and Airbus (AIR.PA) narrow-body jets with GE through their CFM International joint venture.
Safran followed GE (GE.N) in trimming the full-year percentage growth forecast for LEAP engine deliveries to 40-45% from around 50%. So far this year, deliveries of the fuel-saving engine have risen 45% to 1,174 units.
It raised its percentage growth forecast for civil aftermarket sales to the low 30s from mid to high 20s, after the widely watched performance indicator grew 38% in dollar terms in the first nine months.
The contrasting moves come as supply chains weigh on new deliveries while surging travel demand pushes up fleet repairs.
CEO Olivier Andries said in a statement Safran’s priority “remains to ramp-up production while we still operate in a constrained supply chain environment”. (Source: Reuters)
27 Oct 23. Boeing struggles to steer defense unit in another year of billion-dollar losses. Boeing’s (BA.N) defense business is proving harder to turn around than executives initially predicted, with supplier errors and high manufacturing costs contributing to $1.7bn in losses this year on programs like the next Air Force One and NASA’s Starliner capsule.
Despite absorbing $4.4bn in losses in 2022 – which executives said would lower the risk of future cost overruns – the unit has seen little improvement this year.
Excluding last year, losses on Boeing’s defense programs in 2023 exceed those from all years since 2014, according to a Reuters review of Boeing’s regulatory filings.
Boeing is unique among its defense contractor peers, as companies like Lockheed Martin (LMT.N), General Dynamics (GD.N) and RTX (RTX.N) are seeing higher revenues due to demand from the war in Ukraine.
Unlike those companies, however, Boeing is locked into handful of contracts that force the planemaker to take a loss when technology development goes over budget.
The defense unit’s losses this year include $933m in charges in the third quarter, mostly comprising a $482m loss building two Air Force One planes and a $315m charge on an unidentified satellite program that had not previously lost money.
Boeing’s executives said they are putting in place new training and deploying resources to suppliers to ensure the unit moves from negative margins to high-single digit margins by 2025-2026, when its most troubled programs are slated to be past flight testing and on more stable footing.
“We’re driving lean manufacturing, program management rigor and cost productivity consistently across the division,” Chief Financial Officer Brian West said during a Wednesday earnings call. Boeing declined to comment beyond executives’ comments on the call.
Byron Callan, a defense analyst with Capital Alpha Partners, said Boeing’s 2025-2026 timeline to get to positive margins is feasible but questioned why it took the company years to institute programs to improve execution.
“Someone really dropped the ball on all of this,” he said.
Boeing shares have lost 6% this year, compared with the broad-market S&P 500’s 9% gain.
FIXED PRICE CONTRACTS
Analysts also say there is little Boeing can do to offset the financial burden of its long list of fixed-price development contracts with customers like the U.S. Defense Department and NASA, which lock the planemaker into paying all costs above an agreed-upon threshold.
These deals, which make up 15% of Boeing’s defense program revenue, were reached before Boeing’s commercial airplanes business was decimated by the MAX crisis and before the pandemic and high inflation caused costs to spike for materials and labor. Other headaches include a recent manufacturing snafu where a supplier improperly coated KC-46 fuel tanks.
The losses suggest Boeing lacks a true understanding of costs as each new charge “is an upward revision to cost expectations, versus only three months prior,” said Seth Seifman of JP Morgan, in a Wednesday note to investors. “Even after excluding charges, BDS (Boeing Defense Space and Security) still did not generate a real profit.”
Boeing has been adamant it won’t enter into new fixed-price contracts for the development stage of weapons because the unpredictability associated with designing and testing a new product often brings unforeseen costs.
However, the company’s current fixed-price development efforts, which include the U.S. Air Force’s KC-46 refueling tanker and T-7 training jet, new Air Force One planes, the Navy’s MQ-25 tanker drone, and NASA’s Starliner have all continued to run over budget this year.
The latest charge for Air Force One brought total losses to $2.4 bn on a $3.9 bn contract to develop two planes. The program’s current schedule calls for the first jet to be delivered by September 2027.
West also noted $136m in additional losses taken during the quarter, including a $71m charge for the MQ-25 program.
While KC-46 appears to be stabilizing and T-7 will eventually make a profit, there’s “not much you can do” for costly, low-volume programs like Air Force One or MQ-25, said Richard Aboulafia of AeroDynamic Advisory.
A better bet, and one Boeing’s defense segment is aggressively pursuing, is inking future contracts for next-generation fighter jets and cutting-edge drones.
“It’s a target-rich environment,” Aboulafia said.
27 Oct 23. Patria Group’s Interim Report for 1 January – 30 September 2023. Patria’s net sales and operating profit grew and the order stock is at a good level.
The third quarter of 2023
- Patria Group’s net sales for the three quarters was EUR 487.9m (EUR 426.7m in the comparison period).
- Operating profit was EUR 36.9m (EUR 32.8m).
- Equity ratio was 41.5% (41.1%) and net gearing 80.5% (69.6%).
- The development of customer-centricity, operational efficiency and productivity and new ways of working has continued during the third quarter according to Patria’s Horizon 2025 strategy. The focus of the development has been on Patria’s Operations unit, responsible for company’s production and supply chains, and Portfolio unit, responsible for Patria’s products and services as well as their development and sales support.
- Patria’s net sales and operating profit grew, and the order stock continued to be at a good level. A major part of operational focus has been on building production capacity for the new vehicle orders. Some of the budgeted orders for the year were assigned later than planned, but this will not have a significant impact on the production or result of the entire year. The outlook for net sales and profitability for the rest of the year remains strong.
- Patria commenced change negotiations in August 2023 in order to continue the development of its operating model, to meet the increased demand as well as improve its efficiency. The scope of the negotiations covered mainly Patria’s line managers and white-collar workers. After conclusion of the negotiations in October, the company decided on changes including reorganization, combination, change and reduction of tasks and related redundancies or relocation of employees to new positions. The integral changes involve 284 job roles. Aimed to be operational as of 1 January 2024, the introduction of the new organization may lead to redundancies of 56 persons at most.
- Patria and Japan Steel Works Ltd. signed in August 2023 a license agreement on manufacturing Patria AMV XP 8×8 vehicles in Japan. The agreement enables local production in accordance with Japan Ground Self-Defense Force’s Wheeled Armored Personnel Carrier (WAPC) programme. In December 2022, Patria AMV XP 8×8 vehicle was selected by the programme to replace Type-96 8×8 Armoured Personnel Carrier vehicles that are currently in use.
- The Finnish Defence Forces and Patria signed in September 2023 a procurement contract for the implementation of Hawk Full Mission Simulator (FMS). The simulator will be delivered to the Finnish Air Force in 2026 for pilot training use and will be an integral part of the Hawk’s type training phase as well as tactical training phase.
Outlook for the rest of the year
Patria continues to strengthen its operational efficiency and productivity and seeks profitable growth in line with its Horizon 2025 strategy in the second year of the strategy period. Patria’s reliable and cost-effective lifecycle support services and top-notch products have a key role also in the future in maintaining required performance of customer fleets in all conditions.
Following Finland’s decision in December 2021 to acquire F-35 fighter jets, negotiations concerning industrial participation of the selected aircraft will continue also during the rest of the year. In June 2023, Patria and Lockheed Martin signed the first MoA for direct work within Finland´s F-35 industrial participation programme that covers the contractual framework for F-35 forward fuselage assemblies in Finland by Patria.
The multinational joint CAVS programme of the Patria 6×6 vehicle is proceeding as planned. The first deliveries of 91 vehicles that Finland ordered as well as the deliveries of vehicles to Sweden have begun. Germany has officially joined the programme by signing the Technical Arrangement. Serial production of over 200 Latvian vehicles is ongoing. The joint programme has raised interest and is open also for other countries to join by mutual consent of the participating countries.
At the end of 2022, Patria AMV XP 8×8 vehicle was selected by Japan as the new Wheeled Armored Personnel Carrier (WAPC) for Japan Ground Self-Defense Force to replace the current vehicles that are in use. Patria and Japan Steel Works Ltd. have signed a relating license agreement on manufacturing Patria AMV XP 8×8 vehicles in Japan and the preparations for kicking off manufacturing are ongoing.
The strong demand in Patria’s 6×6 and 8×8 vehicles will pose significant requirements for ensuring resources and supply chain management, and measures to tackle this have been taken during the year. Even though some of the orders were placed later than expected, the planned and needed supply capacity is expected to be reached for the essential part during the rest of the year.
The impact of long-term development of the current geopolitical situation, general economic uncertainty, inflation and increasing costs for the rest of the year are difficult to evaluate reliably. At the same time Patria’s delivery capability is expected to stay at a good level. In the mid and long term, Patria and the defence industry in general are likely to see an increase in demand as defence spends are increasing in the majority of European countries.
26 Oct 23. Honeywell beats profit estimates on aviation boost. Honeywell International Inc (HON.O) on Thursday posted a better-than-expected quarterly profit, helped by strong performance in its aviation unit.
Sales at the company’s aerospace business rose 18% on an organic basis in the third quarter.
On an adjusted basis, profit was $2.27 per share, compared with expectations of $2.23.
The company forecasts full-year adjusted profit per share of $9.10 to $9.20, compared with prior guidance of $9.05 to $9.25.
Industrial giant 3M Co (MMM.N) and aerospace peer RTX (RTX.N) raised their annual profit forecasts earlier this week.
Charlotte, North Carolina-based Honeywell tightened its annual sales forecast range. It now expects sales of $36.8bn to $37.1bn, from $36.7bn to $37.3bn.
In the third quarter, the company’s sales rose 3% to $9.21bn, compared with analysts’ estimates of $9.23bn, according to LSEG data.
26 Oct 23. Northrop Grumman lifts 2023 revenue outlook on weapons demand. U.S. defense company Northrop Grumman (NOC.N) on Thursday raised its annual revenue target for the second time this year after its third-quarter earnings beat analysts’ estimates helped by strong weapons demand.
The tense geopolitical landscape has created a strong global appetite for U.S. weaponry, with nations actively engaged in negotiations and striking deals to acquire arms and looking to speed up ongoing contracts. Increased defense spending by the U.S. and its allies benefited Northrop’s topline.
Northrop’s award volume in the reported quarter was $15bn and the book-to-bill ratio, a comparison of orders received to units shipped and billed, was 1.53 to 1.
Sales in the company’s Defense Systems segment rose 6%, helped by high demand for its ammunition and rocket motors used in guided multiple-launch rocket systems, which played a crucial role in supporting Ukraine’s defense efforts against Russian forces.
Ramp up of development programs, primarily the Ground-Based Strategic Deterrent (GBSD), which aims to replace the aging ICBM system and its nuclear cruise missiles boosted sales at Northrop’s Space Systems division by 11% to $3.51bn.
The company’s aeronautic systems business, which houses the high-profile B21 Raider jet program, posted a 9% rise in sales.
Northrop now expects 2023 revenue to be $39bn, from its earlier projected range between $38.4bn and $38.8bn.
Overall profit in the third quarter was $937m, or $6.18 per diluted share, compared with $915m, or $5.89 per diluted share, a year earlier.
Analysts were expecting a profit of $5.81 per share, according to LSEG data.
Quarterly sales jumped 9% to $9.78bn, ahead of estimates of $9.58 bn.
Northrop joined other defense contractors Lockheed Martin (LMT.N), RTX (RTX.N), and General Dynamics (GD.N) in reporting better-than-expected quarterly results.
Northrop’s shares were up about 1% at $488 before the bell.
26 Oct 23. Northrop Grumman Reports Third Quarter 2023 Financial Results
- Net awards of $15bn; book to bill of 1.53
- Total backlog rises to record $84bn
- Sales increased 9 percent to $9.8bn
- Operating income increased 20 percent; segment operating income1 increased 8 percent
- Diluted earnings per share of $6.18
- Operating cash flow of $1.2bn
- Company increases 2023 sales guidance by $400m to ~$39bn
Northrop Grumman Corporation (NYSE: NOC) reported third quarter 2023 sales increased 9 percent to $9.8bn, as compared with $9.0bn in the third quarter of 2022. Third quarter 2023 sales reflect continued strong demand for our products and services. Third quarter 2023 net earnings totaled $937m, or $6.18 per diluted share, as compared with $915m, or $5.89 per diluted share, in the third quarter of 2022. Net earnings were reduced by $156m, or $1.00 per diluted share, as a result of lower net FAS/CAS pension income, and net earnings were increased by $67m, or $0.44 per diluted share, as a result of the sale of a minority interest in an Australian business. “We had another strong quarter with solid performance on our programs, a new record backlog, and growth across all four of our businesses,” said Kathy Warden, chair, chief executive officer and president. “Based on our year-to-date results and increasing demand for our products, we are raising our 2023 sales guidance. We are also providing an initial 2024 outlook that reflects our expectation for solid revenue, operating income and free cash flow growth.”
Third quarter 2023 sales increased $804m, or 9 percent, due to higher sales at all four sectors. Third quarter 2023 sales reflect continued strong demand for our products and services. Operating Income and Margin Rate Third quarter 2023 operating income increased $172m, or 20 percent, due to higher segment operating income, lower unallocated corporate expense and a reduction in the FAS/ CAS operating adjustment. Third quarter 2023 operating margin rate increased to 10.4 percent principally due to the lower unallocated corporate expense and FAS/CAS operating adjustment.
Segment Operating Income and Margin Rate Third quarter 2023 segment operating income increased $82m, or 8 percent, primarily due to higher sales. Third quarter 2023 segment operating margin rate was comparable with the prior year period. Federal and Foreign Income Taxes The third quarter 2023 ETR of 16.2 percent was comparable with the prior year period and reflects an increase in research credits, partially offset by higher interest expense on unrecognized tax benefits.
Net Earnings and Diluted EPS Third quarter 2023 net earnings increased $22m, or 2 percent, primarily due to $172m of higher operating income and a $97m gain recognized upon the sale of our minority investment in an Australian business, partially offset by a $244m reduction in the non-operating FAS pension benefit.
Third quarter 2023 diluted earnings per share increased 5 percent, reflecting a 2 percent increase in net earnings and a 2 percent reduction in weightedaverage diluted shares outstanding.
Cash Flows Third quarter 2023 net cash provided by operating activities decreased $107 m principally due to increased cash collections in the prior year period resulting from billing delays at the end of the second quarter of 2022.
Third quarter 2023 adjusted free cash flow decreased $270m due to lower cash provided by operating activities, a reduction in proceeds from the sale of equipment to a customer and higher capital expenditures. Awards and Backlog
Third quarter and year to date 2023 net awards totaled $15.0bn and $33.9bn, respectively, and backlog totaled $83.9bn. Significant third quarter new awards include $3.6bn for restricted programs (primarily at Space Systems, Aeronautics Systems, and Mission Systems), $1.3bn for E-2, $0.7 bn for Space Development Agency (SDA) Tranche 2 Transport Layer and $0.5bn for Guided Multiple Launch Rocket System (GMLRS).
Three Months Ended September 30
Third quarter 2023 sales increased $229m, or 9 percent, primarily due to higher volume in Manned Aircraft. Higher sales on restricted programs and E-2 were partially offset by lower volume on F/A-18 largely due to post Multi-Year Procurement 4 (MYP4) contract award timing. Operating Income Third quarter 2023 operating income increased $21m, or 8 percent, primarily due to higher sales. Operating margin rate was comparable with the prior year period.
Three Months Ended September 30
Third quarter 2023 sales increased $76m, or 6 percent, primarily due to higher volume in Battle Management & Missile Systems, which was driven by several programs, including Integrated Air and Missile Defense Battle Command System (IBCS), ammunition programs, GMLRS, and Hypersonic Attack Cruise Missile (HACM). Operating Income Third quarter 2023 operating income increased $24m, or 15 percent, due to a higher operating margin rate and higher sales. Operating margin rate increased to 12.8 percent from 11.7 percent primarily due to higher net EAC adjustments at Battle Management & Missile Systems.
Three Months Ended September 30
Third quarter 2023 sales increased $172 m, or 7 percent, primarily due to higher restricted sales in the Networked Information Solutions business area, as well as higher volume on marine systems programs, partially offset by lower volume on the Ground/Air Task Oriented Northrop Grumman Reports Third Quarter 2023 Financial Results 4 1 Non-GAAP measure – see definitions at the end of this earnings release.
Radar (G/ATOR) program largely driven by material receipts and full-rate production (FRP) 5 contract award timing.
Third quarter 2023 operating income increased $18 m, or 5 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 14.7 percent from 15.0 percent primarily due to changes in contract mix toward more cost-type content.
Three Months Ended September 30
Third quarter 2023 sales increased $343m, or 11 percent, due to higher sales in both business areas. Launch & Strategic Missiles sales increased primarily due to ramp-up on development programs, including the Ground Based Strategic Deterrent (GBSD), and Next Generation Interceptor (NGI), as well as higher volume on the Space Launch System (SLS) booster program. Sales in the Space business area were driven by higher volume on restricted programs and the Next-Generation Overhead Persistent Infrared Polar (NextGen Polar) program, partially offset by lower sales on the HALO program. Operating Income Third quarter 2023 operating income increased $22m, or 8 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 8.9 percent from 9.2 percent primarily due to lower net EAC adjustments, partially offset by a $16m benefit from insurance recoveries in our commercial space business.
25 Oct 23. RTX sells cybersecurity, intelligence business unit for $1.3bn. Defense company RTX said it’s selling its cybersecurity business for $1.3bn to an unnamed buyer. The sale of the Cybersecurity, Intelligence and Services division was disclosed in the company’s third-quarter results for 2023, when sales totaled $13.5bn, a decline of 21% from the same period a year earlier.
Reuters on Oct. 24 named the prospective buyer as private-equity firm Blackstone. C4ISRNET could not independently verify the matter; an RTX spokesperson said no additional information could be shared.
The company bills its cybersecurity business as protecting “the most critical information, systems and operations with breakthrough technology and world-class talent.” Its offerings range from digital security services to secure communications products.
RTX is the second largest defense contractor in the world when ranked by defense-related revenue, according to Defense News Top 100 analysis.
The company, formerly known as Raytheon Technologies, rebranded to the three-letter moniker that matches its stock-market ticker earlier this year. CEO Greg Hayes at the time said the reworked name was “a nod to the past and a nod to the future.” (Source: Defense News Early Bird/C4ISR & Networks)
26 Oct 23. Call for Denel to appoint permanent CEO. Two senior Democratic Alliance (DA) public representatives, whose shadow portfolios include troubled State-owned defence and technology group Denel, maintain priority number one should be finding – and appointing – a full-time chief executive.
Kobus Marais (defence and military veterans) and Ghaleb Cachalia (public enterprises) welcomed – with reservations – recent promotional events, but remain adamant it is essential for Denel to move from either acting or interim chief executives.
Since Danie du Toit’s resignation in July 2020 after less than two years occupying the chief executive suite in the Denel Corporate Office in Centurion’s Irene, there have been, according to Cachalia, “seven varieties of chief executive”. Backing the need for someone permanent, he said research showed less disruptive chief executive transitions lead to better company performance.
That acting/interim chief executives have been in place for lengthy periods of time and appear to, de facto, be permanent, is disturbing and is worsened by replacement happening only when the Denel board applies its collective mind, Cachalia believes.
“All round the situation is untenable as it impacts negatively on an already benighted company.”
When Du Toit exited, Denel Aeronautics Chief Executive Michael Kgobe moved from the Denel Kempton Park campus to Irene until William Hlokoane, then Denel Group Chief Operating Officer (COO), took over in February 2021. Eight months later Kgobe was again named interim chief executive.
Marais is of the opinion the non-appointment of a chief executive is driven by a lack of political will rather than any desire to put Denel back on its feet.
“Assuming government is serious about repositioning Denel as a strategic munitions partner to the national defence force and the wider South African defence industry, a permanent chief executive should have been appointed a long time ago. Sadly the lack of political will to steer drastic changes at Denel is absent.”
He asks further, in view of an ANC congress resolution to move Denel from Pravin Gordhan’s Department of Public Enterprises (DPE) to Thandi Modise’s Department of Defence (DoD), whether this is possibly a contributing factor.
In June, Denel interim chair Gloria Serobe told Parliament’s Standing Committee on Public Accounts (SCOPA) the process to appoint a group chief executive, a chief financial officer and a chief audit executive would be completed in the current financial year. The board is down to six members, less than half the 13 it should be.
On the Denel capability demonstration at Armscor’s Alkantpan test range in August and a “show and tell” at Denel’s Overberg Test Range (OTR) early in September, Cachalia has it “cost has to be an issue”.
“Given the state of Denel’s finances and a transparent presentation of the business/interest generated versus the cost would be in order – all of which underscores it cannot be business as usual at Denel. Hard decisions about viability, amalgamation and sale need to be addressed before the company is able to operate in the normal course involving development, showcasing and executing of orders,” he said.
The shadow public enterprises minister takes published comments on the Overberg event to elaborate.
“OTR Chief Executive Bridget Salo is reported as saying: ‘The show and tell … affords an opportunity to interact with our stakeholder and provides a valuable platform to showcase the developments’. SA Air Force (SAAF) Chief, Lieutenant General Wiseman Mbambo remarked ‘openness can be costly but it’s critical in building strong relationships’. He went on to say, the event gave him an opportunity to ‘witness OTR becoming open about their challenges’. This highlights the contradiction between being ‘showcase ready’ and ‘challenges’ which should have been attended to prior to showcasing”.
Marais is more circumspect telling defenceWeb “both Alkantpan and Overberg were successful” pointing out the strategic value of both facilities to South Africa “in the past when they were used by important defence partners companies from abroad”. He maintains both are “assets” which should be retained to benefit South Africa and be “supported to grow Denel’s return to a viable business”.
On the August and September Denel events he has it determining whether they were “good business opportunities one needs to know about the clients hosted and realistic short, medium and long term advantages”.
“If there is/was a high probability to generate business, then it might make good business sense. If not and it is/was a shot in the dark, it might be a bad decision and a waste of money.”
26 Oct 23. Rheinmetall Q3 profits jump on strong ammunition sales.
German defence contractor Rheinmetall (RHMG.DE) said on Wednesday its third-quarter profitability jumped on strong demand for weapons and ammunitions, with operating profit expected to top consensus estimates by 15%.
The company, which will report full results on Nov. 9, did not specify which orders helped it beat expectations, but Russia’s invasion of Ukraine has led to a dramatic increase in demand for munitions across the industry.
Rheinmetall said it expected third-quarter profit of 191m euros ($201.89m), above a consensus estimate of 165.4m euros, and an operating profit margin of 10.9%, compared with a consensus of 9.4%, citing economies of scale from increased volumes.
It affirmed a full-year forecast of sales of 7.4bn to 7.6bn euros, with an operating profit margin of around 12%.
For the first time, the results included recently acquired Spanish munitions maker Expal.
“The significantly higher than expected operating profit is mainly due to strong market dynamics in the security technology business – especially in the division Weapon and Ammunition,” the company said in a statement.
Defence contractors have reaped windfall profits as European Union countries scramble to supply Ukraine for its defence against Russia, and replenish stocks of munitions allowed to diminish since the Cold War.
Several of Rheinmetall’s flagship systems have been deployed in Ukraine, while neighbouring countries have backfilled weapons systems they have donated to their eastern neighbour. ($1 = 0.9461 euros) (Source: Reuters)
26 Oct 23. MilDef Interim Report January – September 2023. Financial development Q3 2023
- Net sales increased by 38% to SEK 226.5m (163.7).
- The gross margin was 50% (51).
- Adjusted EBITDA amounted to SEK 26.5m (19.9), equivalent to an adjusted operating margin of 11.7% (12.2).
- Operating profit (EBIT) amounted to SEK 11.4m (12.5), corresponding to an operating margin of 5.0% (7.6).
- Order intake decreased by 42% to SEK 177.2m (307.2).
- Operating cash flow amounted to SEK -42.0m (-40.1).
- Earnings per share after dilution amounted to SEK 0.14 (0.18).
Financial development January – September 2023
- Net sales increased by 89% to SEK 798.5m (423.5).
- The gross margin was 48% (49).
- Adjusted EBITDA amounted to SEK 108.2m (16.6), equivalent to an adjusted operating margin of 13.5% (3.9).
- Operating profit (EBIT) amounted to SEK 66.7m (-2.3), corresponding to an operating margin of 8.4% (-0.5).
- Order intake increased by 21% to SEK 805.6m (667.5).
- Order backlog as of September 30, 2023 increased by 4% to SEK 1,272m compared with the same date in 2022 (1,218).
- Operating cash flow amounted to SEK -17.5m (-45.7).
- Earnings per share after dilution for the last 12-month period amounted to SEK 1.07 (-0.17) and before dilution, SEK 1.09 (SEK -0.17).
Summary of significant events in the third quarter, July – September 2023
- At the DSEI (Defence and Security Equipment International) trade fair in London in September MilDef launched its newly developed brand platform WE ARMOR IT, signifying that MilDef makes both IT and everything we produce stronger and more sustainable.
- In the third quarter MilDef signed a series of contracts in the US defense market for rugged IT. Based on its products, MilDef will deliver mission-critical functionality under these contracts for land vehicles, aviation platforms and naval vessel installations.
- During the quarter MilDef launched its handheld Tactical Android Device (T.A.D) which will redefine soldier-borne digitalization. The innovative unit addresses the challenges that military personnel face by offering advanced technical functions and durability.
- During the quarter a newly developed Panel PC was launched with a rapidly detachable computer module for a new level of operational flexibility. This unique display and computer combination will enable groundbreaking use of computers and displays in military operations.
26 Oct 23. Swedish defence group Saab raises outlook after Q3 profit jumps. Swedish defence gear maker Saab (SAABb.ST) reported on Thursday a jump in third-quarter profit helped by high demand and raised its full-year sales outlook.
Operating profit at the maker of the Gripen fighter jet rose 51% from a year earlier to 859 m crowns ($76.9 m) on organic sales growth of 31%.
“The geopolitical tensions are impacting our industry and driving the largest increase in defence investments in the last 30 years, particularly in Europe,” CEO Micael Johansson said in a statement.
“In the third quarter, high demand for Saab’s broad defence portfolio continued to result in significant order intake, strong sales growth and improved profitability.”
The maker of military and civilian hardware, whose customers besides Sweden – which has applied to join NATO – also include France, Britain and Germany, said order intake soared 93% to 15.0bn crowns.
“To be able to meet the growing demand from customers in the next decade, building additional capacity and capabilities based on new technologies will be crucial,” Johansson said.
Saab said it now sees organic sales growth of 19-23% in 2023. Its previous guidance, given in July, was for 16-20% growth. It repeated that it expects operating profit growth to be higher than organic sales growth. ($1 = 11.1717 Swedish crowns) (Source: Reuters)
26 Oct 23. Saab Q3 2023 results: Growth momentum in an evolving market.
“The geopolitical tensions are impacting our industry and driving the largest increase in defence investments in the last 30 years, particularly in Europe. In the third quarter, high demand for Saab’s broad defence portfolio continued to result in significant order intake, strong sales growth and improved profitability,” says Micael Johansson, President and CEO, Saab.
Key highlights Q3 2023
- Order intake amounted to SEK 14,977m (7,772) with strong growth in all order sizes in the quarter.
- Sales increased to SEK 11,527m (8,751) with an organic growth of 31%, driven by growth in all business areas.
- EBITDA increased 28% and amounted to SEK 1,424m (1,115), corresponding to an EBITDA margin of 12.4% (12.7).
- Operating income (EBIT) increased 51% and amounted to SEK 859m (568). The EBIT margin was 7.5% (6.5) with improvements in several business areas in the quarter.
- Net income for the period increased to SEK 656m (324) and earnings per share amounted to SEK 4.84 (2.28).
- Operational cash flow in the quarter was SEK -2,058m (559) mainly due to timing of customer payments combined with higher investments.
- Net liquidity position in the quarter was SEK 1.4 bn (0.4).
- Upgraded outlook for organic sales growth 2023: organic sales growth to be between 19-23%, compared to previous outlook of 16-20%.
For more information and explanations of the above key ratios, please see www.saab.com/investors/financials/financial-data.
25 Oct 23. Amphenol Reports Third Quarter 2023 Results and Announces Dividend Increase
Third Quarter 2023 Highlights:
- Sales of $3.199bn, down 3% in U.S. dollars and 5% organically compared to the third quarter of 2022
- GAAP Diluted EPS of $0.83, up 4% compared to prior year
- Adjusted Diluted EPS of $0.78, down 3% compared to prior year
- GAAP and Adjusted Operating Margin of 20.6% and 20.8%, respectively
- Operating and Free Cash Flow of $618m and $544m, respectively
- Closed three acquisitions since July earnings call – Connor Manufacturing Services, Q Microwave and XMA Corporation – and signed an agreement to acquire PCTEL
- Increased quarterly dividend by 5% to $0.22 per share
October 25, 2023 08:00 AM Eastern Daylight Time
Amphenol Corporation (NYSE: APH) today reported third quarter 2023 results.
“We are pleased to have closed the third quarter of 2023 with sales and Adjusted Diluted EPS both exceeding the high end of our guidance”
“We are pleased to have closed the third quarter of 2023 with sales and Adjusted Diluted EPS both exceeding the high end of our guidance,” said Amphenol President and Chief Executive Officer, R. Adam Norwitt. “Sales decreased from prior year by 3%, driven by moderations in the mobile networks, mobile devices, IT datacom, broadband and industrial markets, which were partially offset by growth in the commercial air, military and automotive markets as well as contributions from the Company’s acquisition program. Despite the reduction in our sales from prior year, our team executed strongly in the quarter, with Adjusted Operating Margin reaching 20.8%.”
“During the third quarter of 2023, Amphenol continued to deploy its financial strength in a variety of ways to increase shareholder value. This included the repurchase of 1.7m shares of its common stock for $149 m as well as the payment of dividends of $125m, resulting in total capital returned to shareholders of nearly $275m.”
“We remain focused on expanding our growth opportunities through a deep commitment to developing enabling technologies for customers across our served markets, an ongoing strategy of market and geographic diversification as well as an active and successful acquisition program. To that end, we are excited to have closed on three acquisitions since our July earnings call: Connor Manufacturing Services, Q Microwave and XMA Corporation. Based in Illinois, Connor is a global manufacturer of power interconnect products including high voltage busbars for the automotive and industrial markets with annual sales of approximately $100 m. Based in California, Q Microwave is a designer and manufacturer of mission-critical radio frequency components utilized in military platforms with annual sales of approximately $20 m. Based in New Hampshire, XMA is also a provider of radio frequency components for the military and IT datacom markets with annual sales of approximately $15 m. Connor will be included in our Interconnect and Sensor Systems Segment, while Q Microwave and XMA will be included in our Harsh Environment Solutions Segment. All of these acquisitions further expand our offering of high-technology interconnect products across a variety of our markets, while adding talented management teams to the Amphenol family.”
“We are also pleased that on October 13, 2023, we entered into a definitive agreement to acquire PCTEL, Inc. (Nasdaq: PCTI). PCTEL is a leading global provider of antennas, as well as purpose-built Industrial IoT products and test and measurement solutions. The transaction is expected to close by early 2024, subject to approval from PCTEL’s shareholders and other customary closing conditions. We are excited by the opportunities PCTEL brings to further expand the breadth of our already strong antenna offering.”
Increase in Quarterly Dividend
On October 24, 2023, the Company’s Board of Directors approved a 5% increase in the Company’s quarterly dividend, from $0.21 per share to $0.22 per share. The new dividend amount will be paid on January 10, 2024 to shareholders of record as of December 19, 2023.
Fourth Quarter and Full Year 2023 Outlook
Assuming market conditions do not meaningfully worsen as well as constant exchange rates, for the fourth quarter of 2023, Amphenol expects sales to be in the range of $3.090bn to $3.150bn. This represents a 3% to 5% decline over the prior year quarter. Adjusted Diluted EPS is expected to be in the range of $0.75 to $0.77, representing a 1% to 4% reduction from the fourth quarter of 2022. For the full year 2023, Amphenol expects sales to be in the range of $12.317 bn to $12.377 bn, representing a 2% decline over the prior year, while Adjusted Diluted EPS is expected to be in the range of $2.94 to $2.96, representing a 1% to 2% decline over the prior year. This guidance does not include the impact of the PCTEL acquisition, which has not yet closed.
“Despite the ongoing challenges and uncertainties around the world, we are very pleased with the Company’s third quarter 2023 results,” Mr. Norwitt continued. “The revolution in electronics continues to accelerate, creating exciting long-term growth opportunities for Amphenol across each of our diversified end markets. Our ongoing drive to leverage our competitive advantages and create sustained financial strength, as well as our initiatives to expand our product offerings, both organically and through our acquisition program, have created an excellent base for the Company’s future performance. I am confident in the ability of our outstanding entrepreneurial management team to continue to dynamically adjust to changing market conditions, to capitalize on the wide array of growth opportunities that arise in all market cycles and to continue to generate sustainable long-term value for our shareholders and other stakeholders. Most importantly, I remain truly grateful to our team for their extraordinary efforts in navigating the many challenges around the world while continuing to strongly support our customers and drive outstanding operating performance.” (Source: BUSINESS WIRE)
26 Oct 23. CACI Reports Results for Its Fiscal 2024 First Quarter and Raises Fiscal Year Revenue, Adjusted Diluted EPS, and Free Cash Flow Guidance
Revenues of $1.9bn
Net income of $86.0m and diluted EPS of $3.76
Adjusted net income of $99.7m and adjusted diluted EPS of $4.36
Contract awards of $3.1bn and book-to-bill of 1.7x
CACI International Inc (NYSE: CACI), a leading provider of expertise and technology to government customers, announced results today for its fiscal first quarter ended September 30, 2023.
“Our first quarter results represent a great start to fiscal year 2024 and underscore the exceptional execution of our business,” said John Mengucci, CACI President and Chief Executive Officer. “The business is performing well and ahead of our expectations at this point in the year. We are strategically positioned in the right markets with differentiated capabilities. As a result, we continue to win high-value, enduring work that supports our long-term value creation goals of delivering top-line growth, strong profitability, and robust free cash flow. Our financial strength enables us to opportunistically deploy capital, most recently by repurchasing an additional $150 m of our stock representing about two percent of our outstanding shares. Given our year-to-date performance and strong position, we are raising our fiscal year 2024 revenue, adjusted EPS, and free cash flow guidance.”
Revenues in the first quarter of fiscal year 2024 increased 15 percent year-over-year, driven by organic growth, which included approximately $100 m of higher-than-expected material purchases by our customers. The higher material purchases contributed approximately six points of revenue growth with no material contribution to profit. The increase in income from operations was driven by higher revenues and gross profit. Diluted earnings per share and adjusted diluted earnings per share were unchanged year-over-year, with higher income from operations, lower tax provision, and share repurchases offset by higher interest expense. Cash from operations, excluding MARPA was influenced primarily by higher revenue and the associated temporary effect on working capital.
First Quarter Contract Awards
Contract awards in the first quarter totaled $3.1 bn, with over 50 percent for new business to CACI. Awards exclude ceiling values of multi-award, indefinite delivery, indefinite quantity (IDIQ) contracts. Some notable awards during the quarter were:
- CACI was awarded an eight-year, single-award technology task order valued at up to $1.3bn to provide global enterprise network modernization to an Intelligence Community customer. CACI recognized approximately $750 m of award and backlog value based on current requirements in its first quarter of fiscal year 2024.
- CACI was awarded a five-year expertise contract, with a maximum ceiling value of $917m, to continue to provide complete life cycle software and systems engineering to improve battlespace awareness for the U.S. Air Force. This contract award significantly expands CACI’s long-standing work. Under the contract, CACI will implement Agile and adaptable processes to develop software and data analysis capabilities to advance and modernize command, control, communications, computers, cyber, intelligence, surveillance, and reconnaissance (C5ISR) programs. These capabilities will enhance information dissemination and decision-making across the Air Force and intelligence community, improve information security, and meet program mission objectives.
- CACI was awarded a five-year expertise task order worth up to $420m to continue to provide program management, engineering, administration, procurement, logistics, mechanical, and technical support to the Department of Defense (DoD).
- CACI was awarded a five-year technology task order valued at up to $219m to provide cyber defense and C5ISR support to the DoD.
- CACI was awarded a four-year single-award, IDIQ expertise contract worth up to $150m to continue its support of spaceflight systems, simulation, and software for NASA Johnson Space Center (JSC). The program provides advanced aerospace engineering for crewed spacecraft systems, development of simulation and Virtual Reality (VR) applications, and software in support of human space flight. This award builds on more than three decades of CACI’s dedicated support for JSC’s mission.
Total backlog as of September 30, 2023 was $26.7bn compared with $24.9bn a year ago, an increase of 7 percent. Funded backlog as of September 30, 2023 was $4.2bn compared with $3.7bn a year ago, an increase of 14 percent.
- CACI appointed Stanton D. Sloane to its Board of Directors where he will serve as an independent director on the Board. Sloane began his career in 1984 with General Electric Aerospace, which subsequently merged to become a business of Martin Marietta, then Lockheed Martin, in the 1990s. He held a variety of executive roles including engineering, program management, and business development. In 2004, he was promoted to Executive Vice President, Integrated Systems and Solutions, one of the major divisions of Lockheed Martin.
- CACI was named to Forbes’ Best Employers for Women 2023 for the second consecutive year. Separately, CACI was named a Top Workplace in San Antonio by employee engagement technology partner Energage, LLC. for a fifth consecutive year.
- CACI announced a new, multi-year Strategic Collaboration Agreement (SCA) with Amazon Web Services (AWS) to further advance the company’s application of AWS services as a trusted provider of secure, agile, innovative solutions that can be rapidly adopted by customers in the U.S. government. CACI will build on its successful Agile-at-scale delivery execution model by applying a similar approach to enhance and scale cloud adoption through this SCA.
Fiscal Year 2024 Guidance
The table below summarizes our fiscal year 2024 guidance and represents our views as of October 25, 2023. Our revenue guidance now reflects approximately $200 m of higher-than-expected material purchases by our customers, split evenly between the first and second quarters of fiscal year 2024. This revenue has no material contribution to profit. Our guidance also now reflects lower diluted weighted average shares due to the effect of the share repurchases made during the first quarter. Higher free cash flow reflects first quarter results and confidence in our expectations for the year. (Source: BUSINESS WIRE)
25 Oct 23. Teledyne Technologies Reports Third Quarter Results. Teledyne Technologies Incorporated (NYSE:TDY):
Record third quarter sales of $1,402.5m, an increase of 2.9% compared with last year
- Record third quarter GAAP operating margin of 18.8% and diluted earnings per share of $4.15
- All-time record non-GAAP operating margin of 22.8% and diluted earnings per share of $5.05
- Increasing full year 2023 GAAP earnings outlook to $15.82 to $15.96 diluted earnings per share, compared with the prior outlook of $15.60 to $15.88, and increasing full year non-GAAP earnings outlook to $19.20 to $19.30 diluted earnings per share, compared with the prior outlook of $19.00 to $19.20
- Consolidated Leverage Ratio improved to slightly below 2.0x
- Acquired Xena Networks on October 13, 2023
Teledyne today reported third quarter 2023 net sales of $1,402.5m, compared with net sales of $1,363.6m for the third quarter of 2022, an increase of 2.9%. Net income attributable to Teledyne was $198.6m ($4.15 diluted earnings per share) for the third quarter of 2023, compared with $178.3m ($3.74 diluted earnings per share) for the third quarter of 2022, an increase of 11.4%. The third quarter of 2023 included $49.1m of pretax acquired intangible asset amortization expense, $5.8m of pretax FLIR integration costs and $1.0 m of acquisition related discrete income tax expense. Excluding these items, non-GAAP net income attributable to Teledyne for the third quarter of 2023 was $241.9m ($5.05 diluted earnings per share). The third quarter of 2022 included $48.9m of pretax acquired intangible asset amortization expense as well as $0.8m of acquisition related discrete income tax expense. Excluding these items, non-GAAP net income attributable to Teledyne for the third quarter of 2022 was $216.5m ($4.54 diluted earnings per share). Operating margin was 18.8% for the third quarter of 2023, compared with 18.0% for the third quarter of 2022. Excluding the non-GAAP items discussed above, non-GAAP operating margin for the third quarter of 2023 was 22.8%, compared with 21.6% for the third quarter of 2022.
“In the third quarter, we achieved record operating margin and earnings per share,” said Robert Mehrabian, Chairman, President and Chief Executive Officer. “The results across Teledyne were once again driven by our balanced business portfolio. Our overall performance was led by growth in our marine, medical, aerospace and certain defense businesses, coupled with vigilant cost control. While sales increased year-over-year, revenue was impacted by a stronger U.S. dollar throughout the third quarter and some deterioration in certain end markets, such as industrial automation and laboratory instrumentation. Nevertheless, given our focus on operational excellence, operating margin increased sequentially and year-over-year in the Digital Imaging and Instrumentation segments, helping generate record earnings. We remain highly confident in our balanced and resilient mix of commercial and government businesses and our ability to acquire and integrate complementary businesses. We were pleased to have added Xena Networks to our test and measurement business, which also continued to perform very well in a challenging environment.”
Review of Operations
Comparisons are with the third quarter of 2022, unless noted otherwise.
The Digital Imaging segment’s third quarter 2023 net sales were $775.8m, compared with $777.9m, a decrease of 0.3%. Operating income was $136.3m for the third quarter of 2023, compared with $133.7m, an increase of 1.9%.
The third quarter of 2023 net sales included $25.8m in incremental sales from recent acquisitions, as well as greater sales of x-ray products, infrared imaging detectors and surveillance systems, offset by lower sales of unmanned ground systems for defense applications, micro-electro-mechanical systems (“MEMS”), commercial maritime products and industrial imaging cameras. The increase in operating income was primarily due to favorable product mix, partially offset by $5.8m of FLIR-related integration costs recorded in the third quarter of 2023. Acquired intangible amortization expense for the third quarter of 2023 was $45.4m compared with $44.7m.
The Instrumentation segment’s third quarter 2023 net sales were $329.1m, compared with $306.4m, an increase of 7.4%. Operating income was $85.5m for the third quarter of 2023, compared with $71.1m, an increase of 20.3%.
The third quarter of 2023 net sales increase resulted from higher sales across the marine instrumentation and test and measurement instrumentation product lines. Sales of marine instrumentation increased $22.5m and sales of test and measurement instrumentation increased $2.0m. Sales of environmental instrumentation decreased $1.8m. The increase in operating income primarily reflected the impact of higher sales and favorable product mix.
Aerospace and Defense Electronics
The Aerospace and Defense Electronics segment’s third quarter 2023 net sales were $183.3m, compared with $169.5m, an increase of 8.1%. Operating income was $49.4m for the third quarter of 2023, compared with $44.3m, an increase of 11.5%.
The third quarter of 2023 net sales reflected higher sales of $7.0 m for aerospace electronics and $6.8 m for defense electronics. The increase in operating income primarily reflected the impact of higher sales.
The Engineered Systems segment’s third quarter 2023 net sales were $114.3m, compared with $109.8 m, an increase of 4.1%. Operating income was $10.9m for the third quarter of 2023, compared with $11.9m, a decrease of 8.4%.
The third quarter of 2023 net sales reflected higher sales of $2.7 m for engineered products and $1.8 m for energy systems. The decrease in operating income was primarily driven by program mix, with the third quarter of 2023 having a higher percentage of lower margin space program revenue.
Additional Financial Information
Cash provided by operating activities was $278.2 m for the third quarter of 2023 compared with $268.9 m. Depreciation and amortization expense for the third quarter of 2023 was $76.9 m compared with $80.8 m. Stock-based compensation expense for the third quarter of 2023 was $8.0m compared with $6.7m.
Capital expenditures for the third quarter of 2023 were $23.0m compared with $16.7m. Teledyne received $12.2m from the exercise of stock options in the third quarter of 2023 compared with $0.9m.
As of October 1, 2023, net debt was $2,735.5m which is calculated as total debt of $3,244.1m, net of cash and cash equivalents of $508.6m. As of January 1, 2023, net debt was $3,282.5m and included total debt of $3,920.6 m, net of cash and cash equivalents of $638.1m. During the first nine months of 2023, Teledyne repaid approximately $680m of debt, including $300.0 m of debt that matured in April 2023 and $370.0m of floating rate debt under its term loan due May 2026 and under its credit facility. Teledyne also repurchased and retired $10.0m of its Fixed Rate Senior Notes due April 2031, recording a $1.6m non-cash gain on the extinguishment of this debt.
As of October 1, 2023, $1,130.9m was available under the $1.15bn credit facility, after reductions of $19.1m in outstanding letters of credit.
The effective tax rate for the third quarter of 2023 was 19.2%, compared with 23.0%. The third quarter of 2023 reflected net discrete income tax benefits of $6.1 m compared with $0.3m. The third quarter of 2023 amount primarily related to income tax benefits related to stock-based accounting. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 21.7% for the third quarter of 2023, compared with 23.1%.
Corporate expense was $17.8m for the third quarter of 2023 compared with $15.8m, with the increase primarily related to higher professional fees. Non-service retirement benefit income was $3.1m for the third quarter of 2023 compared with $2.9m. Interest expense, net of interest income, was $18.4m for the third quarter of 2023 compared with $22.0m. The decrease related to reduced outstanding borrowings with lower weighted average interest rates compared to the third quarter of 2022.
Based on its current outlook, the company’s management believes that fourth quarter 2023 GAAP diluted earnings per share will be in the range of $4.07 to $4.21 and full year 2023 GAAP diluted earnings per share will be in the range of $15.82 to $15.96. The company’s management further believes that fourth quarter 2023 non-GAAP diluted earnings per share will be in the range of $4.95 to $5.05 and full year 2023 non-GAAP diluted earnings per share will be in the range of $19.20 to $19.30. The non-GAAP outlook excludes acquired intangible asset amortization for all acquisitions, further FLIR integration costs and acquisition-related tax matters. The company’s annual expected tax rate for 2023 is 22.1%, before discrete tax items. (Source: BUSINESS WIRE)
25 Oct 23. Boeing Reports Third Quarter Results.
Third Quarter 2023
- Reaffirm guidance: $4.5-$6.5bn of operating cash flow and $3.0-$5.0 bn of free cash flow (non-GAAP)
- Still expect to deliver 70-80 787 and now expect to deliver 375-400 737 airplanes
- Now transitioning 787 to five per month; plan to complete 737 production transition to 38 per month by year-end
- Revenue of $18.1 bn reflecting 105 commercial deliveries
- Total company backlog of $469bn, including over 5,100 commercial airplanes
The Boeing Company [NYSE: BA] recorded third quarter revenue of $18.1bn, GAAP loss per share of ($2.70) and core loss per share (non-GAAP)* of ($3.26). Third quarter results were impacted by unfavorable defense performance and lower 737 deliveries. Boeing reported operating cash flow of $0.0bn and free cash flow of ($0.3)bn (non-GAAP).
“We continue to progress in our recovery and despite near-term challenges, we remain on track to meet the financial goals we set for this year and for the long term,” said Dave Calhoun, Boeing president and chief executive officer. “We are focused on driving stability in our supply chain and improving operational performance as we steadily increase production rates to meet strong demand. The important work we’re doing to add rigor around our quality systems and build a culture of transparently bringing forward any issue, no matter the size, can bring short-term challenges – but it is how we set ourselves on the right course for our long-term future. Leading with safety, quality and transparency, we will continue to restore our operational and financial strength.”
Operating cash flow was $0.0bn in the quarter reflecting less favorable receipt timing, including the absence of a prior year tax refund (Table 2).
Cash and investments in marketable securities totaled $13.4bn, compared to $13.8 bn at the beginning of the quarter. The company has access to credit facilities of $10.0bn, which remain undrawn.
Total company backlog at quarter end was $469bn.
Commercial Airplanes third quarter revenue increased to $7.9bn driven by higher 787 deliveries. Operating margin of (8.6) percent also reflects lower 737 deliveries as well as abnormal costs and period expenses, including research and development.
On the 737 program, during the quarter a supplier non-conformance was identified on the aft pressure bulkhead section of certain 737 airplanes. This is not an immediate safety of flight issue and the in-service fleet can continue operating safely. Near-term deliveries and production will be impacted as the program performs necessary inspections and rework, and the company now expects to deliver 375-400 airplanes this year. On production, suppliers are continuing with planned rate increases, and the company expects to complete the final assembly transition to 38 per month by year-end, with plans to increase to 50 per month in the 2025/2026 timeframe. The estimated cost associated with performing the rework is immaterial and included in third quarter results.
The 787 program is now transitioning production to five per month and plans to increase to 10 per month in the 2025/2026 timeframe. The program still expects to deliver 70-80 airplanes this year.
During the quarter, Commercial Airplanes booked 398 net orders, including 150 737 MAX 10 airplanes for Ryanair, 50 787 airplanes for United Airlines, and 39 787 airplanes for Saudi Arabian Airlines. Commercial Airplanes delivered 105 airplanes during the quarter and backlog included over 5,100 airplanes valued at $392bn.
Defense, Space & Security
Defense, Space & Security third quarter revenue was $5.5bn. Third quarter operating margin was (16.9) percent, due to a $482m loss on the VC-25B program driven by higher estimated manufacturing cost related to engineering changes and labor instability, as well as resolution of supplier negotiations. Results were also impacted by $315m of losses on a satellite contract due to estimated customer considerations and increased costs to enhance the constellation and meet lifecycle commitments.
During the quarter, Defense, Space & Security delivered the first T-7A Red Hawk to the U.S. Air Force and captured an award from the U.S. Army for 21 AH-64E Apaches. Backlog at Defense, Space & Security was $58 bn, of which 29 percent represents orders from customers outside the U.S.
Global Services third quarter revenue of $4.8bn and operating margin of 16.3 percent reflect higher commercial volume and mix.
During the quarter, Global Services delivered the 150th 737-800 Boeing Converted Freighter, received an order from the U.S. Navy for P-8 trainer upgrades and signed a digital maintenance solution agreement with Philippine Airlines for Airplane Health Management.
25 Oct 23. U.S. defense firm Teledyne raises 2023 profit target, beats Q3 earnings view. U.S. defense contractor Teledyne Technologies (TDY.N) on Wednesday raised its full-year profit forecast after reporting better-than-expected quarterly earnings on strong performance in its business that makes monitoring and control equipment.
Teledyne, which owns drone maker FLIR systems, also reported an 8.1% rise in its aerospace and defense business amid rising geopolitical tensions.
The Pentagon has awarded lucrative contracts to refill its depleted weapons stockpile after shipping aid to Ukraine, adding to sales at U.S. defense contractors.
California-based Teledyne expects a full-year profit of $15.82 to $15.96 per share, compared with its previously forecast range of $15.66 to $15.88.
In the third quarter ended Oct. 1, Teledyne reported a quarterly profit of $5.05 per share, compared with analysts’ estimates of $4.76.
Its quarterly revenue came in at about $1.4 bn, up 2.9% from a year earlier, but missed analysts’ average estimate of $1.42bn, according to LSEG data. (Source: Google/Reuters)
25 Oct 23. Military equipment for Ukraine helps fuel General Dynamics’ profit. U.S. defense contractor General Dynamics’ (GD.N) third-quarter results beat Wall Street estimates on Wednesday, as demand for artillery and armored vehicles, driven in part by a need to restock supplies sent to Ukraine, helped offset higher costs.
The company benefited from Pentagon spending on replacing equipment that has been sent to Ukraine, like 155 millimeter artillery replacements, which have been essential to Ukraine’s ground strategy in repelling the Russian invasion.
Other weapons systems like combat vehicles such as Stryker as well as Abrams tanks have also been have sent to Ukraine and are slated to be backfilled.
Shares of the Reston, Virginia-based company rose 4.4% after it reported profit for the quarter of $3.04 per share, ahead of analyst estimates of $2.91, and a 6% rise in revenue to $10.57bn, also beating estimates, according to LSEG data.
Artillery has “been a big pressure point up to now with Ukraine, one that we’ve been doing everything we can to support our (U.S.) Army customer,” Jason Aiken, General Dynamics’ chief financial officer, said.
Output has jumped from 14,000 rounds per month to 20,000, he added.
The company’s book-to-bill ratio, a comparison of orders received to units shipped and billed, was 1.4 to 1.
However, sales at the company’s aerospace unit, which makes Gulfstream business jets, slumped 13.4% as supply chain challenges made it harder to deliver planes.
Gulfstream made good on last quarter’s promise to deliver 27 jets, but that was much lower than the 35 jets delivered during the same period a year ago. So far this year 72 of the business jets have been delivered.
On a post earnings call with investors, Aiken said the company expected 135 to 137 deliveries in 2023, down from 139-140 in July.
A certification of G700 business jets will be essential for the company to make its deliveries.
“This could still be possible given 40 G700s are built and awaiting certification, and guidance (from management) of 19 G700s” to be built in the fourth quarter, Jefferies analyst Sheila Kahyaoglu wrote in a note on Wednesday.
“All in, including G700, we anticipate in excess of 60 deliveries in the (fourth) quarter, assuming we’re granted FAA certification before the end of the year,” Aiken said.
General Dynamics joined peer defense contractors Lockheed Martin (LMT.N) and RTX (RTX.N) in reporting better-than-expected quarterly results. (Source: Google/Reuters)
25 Oct 23. General Dynamics Reports Third-Quarter 2023 Financial Results
- Revenue $10.6bn, up 6% year over year
- Net earnings $836m, diluted EPS $3.04
- $1.3 bn net cash provided by operating activities
- Record-high $95.6 bn backlog, 1.4-to-1 book-to-bill
General Dynamics (NYSE: GD) today reported third-quarter 2023 net earnings of $836 m on revenue of $10.6 bn. Diluted earnings per share (EPS) were $3.04.
“We continue to see strong demand and steady revenue growth across the business, resulting in significant growth in backlog,” said Phebe N. Novakovic, chairman and chief executive officer. “Both operating earnings and net earnings increased over last quarter, and cash from operations was a highlight.”
Net cash provided by operating activities in the quarter totaled $1.3bn, or 158% of net earnings. After $227 m in capital expenditures, the company generated free cash flow from operations of $1.1bn, or 131% of net earnings. During the quarter, the company repaid $500m in fixed-rate notes, paid $363 m in dividends, and used $56m to repurchase shares.
Orders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 1.4-to-1 for the quarter, with particular strength in the Marine Systems and Aerospace segments. Company-wide backlog of $95.6bn was the highest in the company’s history. Estimated potential contract value, which represents management’s estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $37.3bn. Total estimated contract value, the sum of all backlog components, was $132.9bn at the end of the quarter.
Aerospace received $2.9bn in new orders during the quarter, growing backlog to $20.1bn.
Significant awards in the quarter for the three defense segments included a U.S. Navy contract for an undisclosed amount for construction of three Flight III Arleigh Burke-class guided-missile destroyers; $1.5bn in contracts for Virginia-class submarine lead yard services, development studies and design efforts, as well as spare parts for maintenance availabilities; $140m, with a maximum potential value of $1.3bn, for Columbia-class submarine advanced nuclear plant studies (ANPS); $1.1bn, with maximum potential value up to $1.9bn, for munitions, ordnance, and the establishment of additional production capacity; a Department of Homeland Security contract with maximum potential value of $710m to continue infrastructure modernization of its St. Elizabeth’s campus in Washington, D.C.; and $365m, with maximum potential value of $775m, for several key contracts for classified customers.
25 Oct 23. INVISIO Interim Report January-September 2023: Strong sales and a healthy order book.
CEO comment, “The group continued to make progress during the third quarter, recording revenue of more than SEK 300 m – the highest ever for a single quarter. Order intake surpassed SEK 250 m and the order book stood at more than SEK 700 m at September 30. Our previous guidance of strong revenue and profitability in the coming quarters therefore remains unchanged.”
- Revenue: SEK 311.6m (195.1)
- Gross profit: SEK 190.9m (113.3)
- Gross margin: 61.3% (58.1)
- EBITDA: SEK 66.5m (29.3)
- EBITDA margin: 21.4% (15.0)
- Operating profit/loss: SEK 51.2m (17.5)
- Operating margin: 16.4% (9.0)
- Profit/loss for the period: SEK 40.2m (13.5)
- Earnings per share: SEK 0.88 (0.30)
- Cash flow from operating activities SEK 1.8m (4.1)
- Order intake: SEK 258.4m (291.0)
- Order book: SEK 717.5m (615.5)
- Revenue: SEK 892.8m (486.2)
- Gross profit: SEK 548.8m (283.7)
- Gross margin: 61.5% (58.4)
- EBITDA: SEK 223.6m (40.5)
- EBITDA margin: 25.0% (8.3)
- Operating profit/loss: SEK 180.5m (5.4)
- Operating margin: 20.2% (1.1)
- Profit/loss for the period: SEK 127.5m(1.8)
- Earnings per share: SEK 2.80 (0.04)
- Cash flow from operating activities SEK 167.9m (15.6)
- Order intake: SEK 975.5m (845.2)
- Order book: SEK 717.5m (615.5)
Important events in the quarter
- Revenue of SEK 311.6 m (195.1) set a new record for a single quarter. Rolling 12-month revenue was just under SEK 1.2 bn.
- The new V60 II ADP control unit, with integrated AI capability and the RA4000 Magna™ digital headset, attracted strong interest at the DSEI trade fair in London and the AUSA event in Washington, DC.
24 Oct 23. RTX beats Q3 estimates, approves $10bn share repurchase. RTX reported better-than-expected quarterly earnings on Tuesday, as a strong performance at its Collins Aerospace business offset the impact from a major quality crisis at engine-making unit Pratt and Whitney.
The company also approved a $10bn share repurchase program that will be funded through short and long-term debt.
Shares of the aerospace major were up 6.3% in early trade.
RTX said in July it had found microscopic contaminants in powdered metal, used to manufacture high-pressure turbine discs that are part of the engine’s core, the presence of which could lead to cracks.
RTX had at the time said 200 Geared Turbofan (GTF) engines would require “accelerated inspection” with 60 days to fix each engine with a contamination issue. However, two months later, it expanded the scope of inspections and said it would need to pull up to 700 engines off aircraft for lengthy quality inspections.
The powdered metal issue has forced RTX to shorten the expected life of certain parts for the PW1500 and PW1900 engines, which will cause “some incremental” groundings of Airbus A220s and Embraer E2 aircraft in the first half of 2024.
RTX also expects to accelerate the removal and inspection of 100 V2500 engines, which power A320ceo aircraft, over the next four years.
Despite other engine types impacted by the metal contaminant issue, Chief Financial Officer Neil Mitchill told Reuters in an interview on Tuesday that “we do not see a significant incremental financial or operational impact.”
Maintenance shop output remains the biggest risk for executing the GTF inspection plan, executives said. RTX expects to have 16 repair facilities by end of 2023 after bringing six facilities online.
The company is also ramping up production of high pressure turbine and compressor disks to replace potentially contaminated ones, and plans to be manufacturing at full rate by second-quarter 2024.
Pratt and Whitney, a subsidiary of RTX, booked a $2.48 bn operating loss in the reported quarter related to engine recalls and compensations to airlines.
But profit at RTX’s Collins Aerospace unit, which makes avionics and aerospace components, rose 22% to $903 m.
RTX reported an overall third-quarter adjusted profit of $1.25 per share, beating Wall Street estimates of $1.21, according to LSEG data.
Adjusted revenue rose 12% to $18.95 bn, ahead of analysts expectations of $18.59 bn.
Despite the GTF-related losses, RTX raised its outlook for 2023, forecasting free cash flow of $4.8 bn compared with its previous prediction of $4.3 bn. The company now expects reported sales of $68.5 bn, up from about $67.5 bn, and adjusted sales of $74 bn, up from $73 bn.
Adjusted earnings per share – previously projected to be $4.95 to $5.05 – are now expected to be between $4.98 and $5.02.
The Arlington, Virginia-based company also entered into an agreement to sell its Cybersecurity, Intelligence and Services business within its Raytheon segment for around $1.3 bn.
Private equity firm Blackstone (BX.N) was the purchaser of the business, two sources familiar with deal said on condition of anonymity. Blackstone did not immediately return a request for comment. (Source: Reuters)
24 Oct 23. RTX Reports Q3 2023 Results.
RTX delivers strong commercial aftermarket growth; announces $10 bn accelerated share repurchase program; updates 2023 outlook
RTX (NYSE: RTX) reported third quarter 2023 results.
Third quarter 2023
- Reported sales of $13.5bn, down 21 percent versus prior year, reflecting the impact of the previously disclosed Pratt powder metal matter
- Adjusted sales* of $19.0bn, up 12 percent versus prior year
- GAAP EPS from continuing operations was a loss of $0.68, which reflects $1.53 charge from the Pratt powder metal matter and $0.40 of acquisition accounting adjustments and other net significant and/or non-recurring charges
- Adjusted EPS* of $1.25, up 3 percent versus prior year
- Operating cash flow from continuing operations of $3.3 bn; Free cash flow* of $2.8bn
- Company backlog of $190 bn; including $115 bn of commercial and $75bn of defense
- Repurchased $1.4bn of RTX shares
Updates outlook for full year 2023
- Reported sales of approximately $68.5bn, up from $67.5 – $68.5bn
- Adjusted sales* of approximately $74.0bn, up from $73.0 – $74.0bn
- Adjusted EPS* of $4.98 – $5.02 from $4.95 – $5.05
- Free cash flow* of approximately $4.8bn, up from approximately $4.3bn
- Share repurchase spending of approximately $12.8bn of RTX shares, up from $3.0bn
“We have made significant progress on our assessment of the Pratt & Whitney powder metal manufacturing matter and expect the financial impact to be in line with the previously disclosed charge,” said RTX Chairman and CEO Greg Hayes. “We are now focused on executing on our fleet management plans and are working relentlessly to mitigate further disruption to our customers. We do not expect any significant future incremental impact as a result of these fleet management plans.”
“The historic demand across our commercial aerospace and defense businesses drove 12 percent organic sales* growth during the third quarter and led to another record backlog of $190bn. We are on track to deliver on our updated financial commitments for 2023 including our increased sales and free cash flow* outlook, as well as the tightened range for adjusted EPS* of $4.98 to $5.02 per share.”
“Our industry leading franchises in Collins Aerospace, Pratt & Whitney, and Raytheon, position RTX to deliver significant long-term value for our shareowners. Today, RTX shares are an attractive investment opportunity and we are immediately proceeding with a $10 bn accelerated share repurchase program and increasing our capital return commitment through 2025 to $36 – $37bn.”
The company also announced today that it has entered into a definitive agreement to sell its Cybersecurity, Intelligence and Services business within its Raytheon segment. The sale price is approximately $1.3bn and is subject to regulatory approvals and other customary closing conditions.
Accelerated Share Repurchase Program
- The RTX board of directors has approved a $10 bn accelerated share repurchase program commencing almost immediately
- This will result in an increase to RTX’s post-merger shareowner capital return commitment to $36 – $37bn through 2025, up from the prior range of $33 – $35bn
- The program will be funded through a combination of short and long-term debt, with deleveraging to begin in 2024 in part supported by proceeds from the previously announced dispositions including Collins’ actuation and flight control business in July, as well as Raytheon’s Cybersecurity, Intelligence and Services business
Third quarter 2023
RTX reported third quarter sales of $13.5bn, down 21 percent over the prior year, which included a $5.4bn charge related to the previously disclosed Pratt powder metal matter. On an adjusted basis, sales* were $19.0 bn, up 12 percent over the prior year. GAAP EPS from continuing operations was a loss of $0.68, down versus the prior year, and included a $1.53 charge related to the Pratt powder metal matter, $0.28 of acquisition accounting adjustments, $0.05 of restructuring, and $0.07 related to other net significant and/or non-recurring charges. Adjusted EPS* of $1.25 was up 3 percent versus the prior year.
The company recorded a net loss from continuing operations attributable to common shareowners in the third quarter of $984m, down versus the prior year which included the after-tax impact of $2.2bn related to the previously disclosed Pratt powder metal matter, $406m of acquisition accounting adjustments, $80m of restructuring charges, and $96m of other net significant and/or non-recurring charges. Adjusted net income* was $1.8bn, up 2 percent versus prior year. Operating cash flow from continuing operations in the third quarter was $3.3bn. Capital expenditures were $564m, resulting in free cash flow* of $2.8bn.
Summary Financial Results – Continuing Operations Attributable to Common Shareowners
Backlog and Bookings
Backlog at the end of the third quarter was $190bn, of which $115bn was from commercial aerospace and $75bn was from defense.
Notable defense bookings during the quarter included:
- $1.9bn of classified bookings at Raytheon
- $1.1bn for F135 sustainment at Pratt & Whitney
- $616m for F135 production at Pratt & Whitney
- $412m for Next Gen Short Range Interceptor development at Raytheon
- $383m for HAWK and Patriot sustainment at Raytheon
- $368m for TOW production at Raytheon
- $297m for Ukraine NASAMS production at Raytheon
- $277m for Excalibur production at Raytheon
Beginning in Q3 2023, we are operating in three business segments: Collins Aerospace, Pratt & Whitney, and Raytheon. Segment information included below is reflective of the new structure and prior period information has been recast to conform to our current period presentation.
Collins Aerospace had third quarter 2023 reported sales of $6,629m, up 16 percent versus the prior year. The increase in sales was driven by a 30 percent increase in commercial aftermarket and a 27 percent increase in commercial OE, which was partially offset by a 1 percent decrease in military. The increase in commercial sales was driven primarily by strong demand across commercial aerospace end markets, which resulted in higher flight hours and higher OE production rates. The decrease in military sales was driven primarily due to the timing of deliveries.
Collins Aerospace recorded operating profit of $903m, up 22 percent versus the prior year. The increase in operating profit was primarily driven by drop through on higher commercial aftermarket and OE volume, partially offset by higher production costs, unfavorable military mix, and higher SG&A. Q3 2023 operating profit included a $57m charge related to a litigation matter and $83m related to restructuring and other significant and/or non-recurring items. On an adjusted basis, operating profit* of $1,043m was up 38 percent versus the prior year.
Pratt & Whitney
Pratt & Whitney had third quarter 2023 reported sales of $926m, down 83 percent versus the prior year. Q3 2023 sales included the impact of a charge related to the powder metal matter of $5,401m. The remaining change was driven by a 25 percent increase in commercial OE, a 21 percent increase in commercial aftermarket, and a 7 percent increase in military sales. The increase in commercial sales was primarily due to higher volume and content, and favorable mix across commercial aftermarket, as well as favorable OE volume and mix in Large Commercial Engines. The increase in military sales was driven by higher F135 development and sustainment volume. Adjusted sales* of $6,327m, were up 18 percent versus the prior year.
Pratt & Whitney recorded an operating loss of $2,482m, down $2,798m versus the prior year. Q3 2023 operating loss included the impact of a charge related to the powder metal matter of $2,888m. Excluding the impact of the powder metal matter and other significant and/or non-recurring items, Pratt & Whitney recorded adjusted operating profit* of $413 m in the third quarter of 2023, up 30 percent versus the prior year. The increase in adjusted operating profit* was primarily driven by drop through on higher commercial aftermarket sales which was partially offset by higher commercial OE volume, higher production costs, unfavorable military mix, and higher R&D expenses.
Raytheon had third quarter 2023 reported sales of $6,472m, up 3 percent versus prior year. The increase in sales was primarily driven by higher volume in Naval Power, including AIM-9X, and Advanced Technology classified programs.
Raytheon recorded operating profit of $560m, down 18 percent versus the prior year. The decrease in operating profit was driven by higher volume on lower margin programs and lower net program efficiencies, including additional headwind on certain fixed price development programs. Raytheon recorded adjusted operating profit* of $570m, down 18 percent versus the prior year.
24 Oct 23. GE raises 2023 profit forecast yet again on aviation boom. General Electric (GE.N) on Tuesday raised its full-year profit forecast for a third time this year after quarterly earnings topped Wall Street estimates on robust demand for jet engine parts and services and a better performance in its renewable business.
GE shares were up about 5.6% at $112.72 in morning trade.
GE’s aviation business, its cash cow, has been lifted by a surge in demand for aftermarket services as a strong rebound in air travel prompted airlines to use jets for longer against the backdrop of commercial plane shortages.
The business, however, is still grappling with supply-chain challenges. The company said high supplier delinquencies are affecting jet engine output, pushing out the deliveries for LEAP engines into 2024 and 2025.
“As we ramp, as the air framers ramp, all of us have to do more week to week, month to month sequentially,” CEO Larry Culp said told Reuters. “And if we don’t, that delinquency calculation will increase.”
LEAP engines, which GE produces in a joint venture with France’s Safran (SAF.PA), power the narrowbody aircraft of Boeing Co (BA.N) and Airbus (AIR.PA). The company now estimates the engine deliveries to be up 40% to 45% this year from 2022, down from a 50% increase estimated earlier.
Culp said the company aims to have 20% to 25% year-on-year increase in LEAP engine deliveries in 2024.
GE’s aerospace unit posted double-digit growth in orders, revenue and profit from a year earlier. Its margin expanded by 130 basis points in the quarter from a year ago.
The company’s performance contrasts with rival RTX (RTX.N), which reported a near bn-dollar quarterly loss due to a major quality crisis at its subsidiary Pratt and Whitney affecting the popular Geared Turbofan (GTF) engines.
Profits at GE’s grid and onshore wind businesses in the quarter helped narrow losses at its renewable unit.
Culp expressed confidence that the businesses would continue to improve, but said offshore wind was estimated to report losses of roughly $1 bn this year. He expected similar losses next year.
The renewable business has struggled due to a combination of weak demand and higher raw material and labor costs.
GE, which has completed the separation of its healthcare unit, said it would spin off its aerospace and energy, including renewables, businesses into independent companies in the beginning of the second quarter next year and would list them on the New York Stock Exchange.
GE generated $2.7 bn from the sale of a portion of its shares in AerCap Holdings NV (AER.N) in the third quarter. It said it expects to fully monetize its remaining about 14.5% stake in the aircraft leasing giant in an “orderly manner over time.”
The Boston-based company now expects 2023 adjusted profit per share of $2.55 to $2.65, compared with an earlier forecast of $2.10 to $2.30.
Free cash flow for the year is estimated to be in a range of $4.7 bn to $5.1 bn, up from $4.1 bn to $4.6 bn expected in July.
Its adjusted profit for the third quarter came in at 82 cents per share, topping an average analysts’ expectation of 56 cents per share, LSEG data showed. (Source: Reuters)
24 Oct 23. uAvionix Acquires Iris Automation. uAvionix, a leader in communications, navigation, and surveillance (CNS) solutions for the safe integration of Crewed and Uncrewed Aircraft Systems (UAS), has announced its acquisition of Iris Automation™, provider of optical Detect and Avoid (DAA) technology. This strategic move combines uAvionix’s extensive CNS and aviation expertise with Iris’ leadership in computer vision-based systems for the safe separation of aircraft. The acquisition not only bolsters uAvionix’s capabilities and services but also marks an important leadership change as Jon Damush, former CEO of Iris Automation, takes the helm as CEO of uAvionix Corporation.
“The combination of Iris Automation’s and uAvionix’s capabilities provides for a multi-layered-safety architecture that supports integration of UAS into the National Airspace System,” noted Paul Beard, CTO and founder of uAvionix. “Through our collective efforts, we are solving the two biggest technical challenges to UAS integration: Command and Control and Detect and Avoid. Solving these problems builds safer airspace for all users.”
A Safe and Efficient Integrated Airspace
uAvionix’s deep experience with avionics development and certification in crewed, uncrewed, and defense technologies have long provided innovative and cost-effective products and services that create cooperative communication and awareness for all airspace users, from the stratosphere to the airport surface. Iris Automation’s pioneering airborne and ground-based optical systems deliver non-cooperative situational awareness for the integration of crewed and uncrewed aircraft. Together, the combined capabilities position uAvionix to provide aviators with the certified avionics, aviation data, and safety solutions necessary for a fully integrated airspace.
Jon Damush Assumes Role of CEO of uAvionix Corporation
As CEO, Jon Damush expands the current uAvionix leadership team and brings more than 30 years of aviation technology experience. His extensive background in engineering for crewed and uncrewed aviation, software development, and systems integration positions him as a visionary leader to guide uAvionix’s growth across diverse markets, including General Aviation, Uncrewed Aviation, Defense, and Aviation Networks.
“Jon Damush’s appointment as CEO hits all the right marks for uAvionix. His exceptional background and vision complement an already strong leadership team at uAvionix and aligns perfectly with the uAvionix mission to lead the way in advancing aviation safety and efficiency,” said David Page, Partner at DC Capital Partners. “The addition of Iris’ optical capabilities with existing uAvionix solutions further cements our market position within BVLOS operations.”
The acquisition of Iris Automation, coupled with Jon Damush’s leadership, fortifies uAvionix’s position as an industry leader for the safe and efficient integration of UAS into the National Airspace. By innovatively combining its aviation expertise with Iris’ advanced technology systems, the company is ushering in a new era for safety and efficiency for everything that flies.
uAvionix was founded with the mission of bringing safety solutions to aviation that accelerate the integration of Unmanned Aircraft Systems (UAS) into National Airspace Systems (NAS). uAvionix offers innovative, low SWaP TSO certified and uncertified avionics and services for General Aviation (GA), Defense and UAS markets. The team consists of an unparalleled engineering and management team with a unique combination of experience within avionics, surveillance, airport services, UAS aircraft development, radio frequency (RF), and semiconductor industries.
To learn more about uAvionix crewed and uncrewed products and services, please visit: www.uavionix.com
About Iris Automation
Iris Automation is a safety avionics technology company pioneering on- and off-board perception systems and aviation policy services that enable customers to build scalable operations for crewed and uncrewed aircraft; unlocking the potential of countless industries. Iris’ Casia system runs either onboard the aircraft or in a ground-based configuration. We work closely with civil aviation authorities globally as they implement regulatory frameworks ensuring BVLOS is conducted safely, partnering on multiple FAA ASSURE and BEYOND UAV Integration Programs and Transport Canada’s BVLOS Technology Demonstration Program. Visit www.irisonboard.com. (Source: C-UAS Hub)
25 Oct 23. Doodle Labs Works to Increase UAS Operational Capabilities.
Doodle Labs has announced its strategic partnership with UKRSPECSYSTEMS, a prominent manufacturer of state-of-the-art unmanned aerial vehicles (UAVs). This collaboration is geared towards tackling the significant challenges drone manufacturers face in supplying UAS to the Ukrainian defense forces and enhancing the operational capabilities of the MINI SHARK UAV.
The Ukrainian defense forces have encountered substantial obstacles when utilizing UAVs, including persistent threats from Russian jamming techniques and the complexities of challenging terrains and unpredictable environmental conditions.
In response to the imperative for resilient and robust communication systems in UAV operations, UKRSPECSYSTEMS has seamlessly integrated Doodle Labs’ battle-tested Helix Mesh Rider Radio into the MINI SHARK UAV. This onboard datalink solution is purposefully designed to overcome the Ukrainian defense forces’ specific challenges.
The Helix Mesh Rider Radio, developed by Doodle Labs, harnesses patented multi-band wireless technology to facilitate secure and dependable communication, effectively countering jamming attempts. Its advanced mesh networking capabilities ensure uninterrupted connectivity, even in challenging and unpredictable environments. By harnessing the cutting-edge capabilities of the Helix Mesh Rider Radio, the MINI SHARK UAV experiences an augmented situational awareness, extended operational range, and exceptional resistance to adversarial interferences.
Field operators in Ukraine have reported their successful transmission of HD video over distances of up to 80 kilometers while effectively evading active Russian jamming attempts. This achievement is made possible by utilizing the six available frequency bands within the multi-band Mesh Rider Radio.
“We are thrilled to partner with UKRSPECSYSTEMS in revolutionizing the UAV industry by equipping the MINI SHARK UAV with our Helix Mesh Rider Radio,” said Ashish Parikh, VP Business Development for Doodle Labs. “By combining our expertise in wireless communication with UKRSPECSYSTEMS’ exceptional UAV capabilities, we can provide the Ukraine defense forces with a superior solution that addresses the unique challenges they face.”
The MINI SHARK UAV, developed by UKRSPECSYSTEMS, has gained global recognition for its exceptional performance, versatility and reliability. With the integration of Doodle Labs’ Helix Mesh Rider Radio, it sets a new standard in the field of unmanned aerial systems, empowering the Ukraine defense forces to overcome obstacles and achieve mission success in even the most hostile environments.
“We are delighted to integrate Doodle Labs’ Helix Mesh Rider Radio into our Mini Shark UAV,” UKRSPECSYSTEMS leaders said in a statement. “The partnership with Doodle Labs allows us to offer a cutting-edge solution to our valued customers, ensuring they have access to advanced technology that surpasses the challenges faced in UAS operations.”
For more information about Doodle Labs’ innovative wireless communication solutions, visit doodlelabs.com/government-defense/
For more information about UKRSPECSYSTEMS’ Mini Shark UAV, visit https://ukrspecsystems.com/drones#mini-shark-block
About Doodle Labs LLC
Doodle Labs designs and produces industrial-grade wireless networking solutions. The company focuses on mesh networking for robotic systems, providing high throughput, long-range Mesh Rider solutions for UAVs, UGVs, AMRs, connected teams, government/defense, private wireless and other applications.
The company’s Helix Mesh Rider Radio was developed with sponsorship from DIU and is the Blue UAS program’s datalink of choice.
Doodle Labs was founded in 1999 and has offices in the United States and Singapore. For more information, visit http://www.doodlelabs.com
UKRSPECSYSTEMS is a renowned manufacturer of unmanned aerial vehicles (UAVs) that are widely recognized for their exceptional performance, reliability, and versatility. For more information, visit https://ukrspecsystems.com/ (Source: C-UAS Hub)
25 Oct 23. Kitron: Q3 2023 – Record third-quarter sales and strong profitability. Kitron today reported record third-quarter sales and strong profitability, with margins consistently above the company’s long-term target.
Kitron’s revenue for the third quarter was EUR 179.2m, compared to 165.5m last year. Growth was particularly strong within the Electrification market sector.
Third-quarter operating profit (EBIT) was EUR 16.2m, compared to 11.5m last year. EBITDA was EUR 20.7m, compared to 15.8m last year.
The order backlog ended at EUR 502m, an increase of 10 per cent compared to last year, reflecting continued strong demand. The highest growth was in the market sectors Electrification and Defence & Aerospace. However, the order backlog is lower than in the preceding quarter as the gradually improving electronic component situation has reduced lead times.
Peter Nilsson, Kitron’s CEO, comments: “In the third quarter of 2023, we have once again set a new benchmark for our performance with record third-quarter sales. The quarter underscores our resilience and capability, showcasing a period marked by robust profitability and the fourth consecutive quarter with more than 9 per cent EBIT margin. As we have said before, we have expected our order backlog to normalize due to the gradually improving electronic component situation. However, our outlook holds steady, indicating a trend towards growth rather than a contraction.”
Profitability expressed as EBIT margin was 9.0 per cent in the third quarter, compared to 6.9 per cent in the same quarter last year.
Profit after tax amounted to EUR 9.7m, compared to 7.5m in the same quarter the previous year. This corresponds to earnings per share of EUR 0.05, up from 0.04 last year.
Stable capital efficiency
Operating cash flow in the third quarter was EUR 5.0m, compared to 14.6m in the third quarter of 2022. Year-to-date cash flow was 24.4m compared to 7.7m in 2022.
Net working capital was EUR 200m, an increase of 19 per cent compared to the same quarter last year. Net working capital as a percentage of revenue was 26.7 per cent compared to 25.8 per cent last year. Capital efficiency ratios have stabilized.
For 2023, Kitron reiterates its outlook from the second-quarter report and expects revenues between 750 and 800 EURm with an operating profit (EBIT) between 65 and EUR 75m. Kitron is a leading Scandinavian electronics manufacturing services company for the Connectivity, Electrification, Industry, Medical devices and Defence/Aerospace sectors. The group is located in Norway, Sweden, Denmark, Lithuania, Germany, Poland, the Czech Republic, India, China and the United States. Kitron has about 3 200 employees, and revenues were EUR 641 m in 2022. www.kitron.com (Source: Google/Yahoo!)
24 Oct 23. Denel has ‘stabilised’, but is its future secure?
The Engineering News article “Denel seeking to rebuild itself after severe collapse” provides interesting reading. There have been no audited Denel financial statements released for the last three years. The business has been insolvent. Losses amount to over R9 bn in the four years from 2019-2022. 2022-23 revenue (not to be confused with turnover when you read the Denel Financial Reports) is R1.466 bn from a staff complement of just 1 670 people.
Denel states that it is in the process of stabilising the organisation. The company is seeking to re-establish the correct skills mix for its needs. There has been a large scale staff exodus. An analysis of Denel financial reports shows that its workforce is less than 12% of the group size in the post 1995 era.
Revenue performance has flatlined in Rand terms. If the US Dollar was the method of reporting, the figures would be dismal.
The challenge for the business is highlighted in the turnover generated per employee. Denel is languishing at sub R1 m returns from each employee. Denel can be seen as a manufacturing entity or even a technology house. The turnover per employee for these types of business should be a minimum of R1.5 m per employee. Current Reutech Allied Electronics results indicate that this is achievable for a company with majority exposure to the defence sector.
Denel’s financial reports since 2004 have a common theme: either Restructure or New Strategy. It can be seen that the 2014-2016 period saw a focused implementation that reaped rewards. Unfortunately this was very short lived as state capture intervened and reversed these gains.
There has been a realisation that export is a potential source of revenue. With the exception of short periods, Denel’s export percentage remains low. This shows that Denel is tightly aligned with local defence spend. This is also telling in its revenue performance.
The South African defence industry (SADI) has focussed on exploiting the export market. Export value analysis indicates that the private defence industry has absorbed Denel’s contractions and is now the leading element in the SADI. This highlights that there is a private industry capable of covering local needs. This is in contradiction to the Denel Group CEO statement that “Loss of Denel’s capabilities will mean that the SANDF will have to rely on imported systems in future and this will mean that it will have no security of supply”.
So, the current rehashing of new strategies needs to be evaluated. The people generating these strategies have no “skin in the game”. This is a general problem for all state-owned entities (SOEs). So what if the Board and Executive run the business into the ground?
Denel has most recently been allocated R3.4bn by the National Treasury for restructuring. R1.8 bn has already been distributed for reviving Denel. This means that there is another R1.6bn that needs to flow (this is contingent on Denel meeting certain targets). This to an entity that has almost no people and that has stated it needs to partner with local and international entities to enable deliveries.
Privatisation, or semi release of control, is not acceptable for the state. The perception is that if a business entity shareholding is sold then there will be job losses and the local market would be negatively impacted and South Africa’s sovereignty would be compromised. The SA defence industry has actually proven this perception to be incorrect. One good thing did come out of the 2006-07 restructuring plan: foreign partners were sourced for Denel Munitions, Denel Optronics and Turbomeca Africa. Today, Rheinmetall Denel Munitions and Hensoldt Optronics are high performers in the SADI stable. It can be seen that in the period 2009 to 2015 Denel shed a further 14% of jobs, while the three associated companies added 20% to their workforce. This is the result of having “skin in the game”.
The new Denel strategy proposes streamlining into four business units. Denel is restructuring in a capability destroying manner. This goes against the approved Aerospace & Defence Master Plan statement that “A game changing vision encompassing a vision of an Entrepreneurial State and focussed collaborative action to move forward into growth, is supported.”
This is while a basic analysis indicates that there is potential for 18 business units that can be created around current Denel intellectual property. The challenge is that this is too much for Denel to manage internally. There is an option to disperse these entities into the private SADI sector. As we know Denel cannot exercise orders without industry support, or, in the words of the Denel Chief Restructuring Officer, partnership. This could be made formal in an entrepreneurial manner.
Previous Denel experience shows that co-investment by a foreign entity (30%) can bear fruit for exploiting export markets. This would need to be offset with a majority local custodian (40%). The key is allocating the remaining R1.6 bn from government to the capabilities for support to establish a basis without losing any remaining Denel employees. The R1.6 bn could cover the current liability for a remaining share in the business (30%). This is a basis for a profit generating entity.
The role of the Denel Board would then be to act as the investment manager on behalf of the proposed new super State Owned Investment House that is going to control the shareholding of the SOEs including Denel. The aim is to flow funding (read profit) back to the state for their seed investment. The secondary aim is for the entities to be self-sustainable (no future funding from the state). This while the government still has influence over sovereign and strategic elements still within the Denel stable.
The state can set rules for identifying local and foreign partners, but time is of the essence. The ongoing SAA saga needs to be avoided. The value associated with Denel’s intellectual property is diminishing quickly as both local and foreign entities recreate the current Denel knowledge set in other companies.
Some guidelines for the proposed alternative to rejuvenating Denel:
- Only majority local owned entities can take up the larger stake.
- A local entity can only be involved in one of the Denel business entities.
- A foreign entity can only be involved in one of the business entities (previous Denel investors in the Associate companies cannot take on a new business entity).
- No more than two business entities can accept investment from a single country. The aim is to expand the market.
- Each business entity needs to commit to establish or partner with at least one apprenticeship college.
- Each business Entity needs to align with at least one institute of higher learning to promote knowledge expansion and future research and development (R&D).
- The business entity needs to commit at least 2.5% of turnover to R&D.
- The local custodian and foreign entity to commit to local production for a minimum of 60% of the business unit turnover in South Africa.
- Target for the entity must be to sustain a minimum of 75% foreign sales. (Source: https://www.defenceweb.co.za/)
23 Oct 23. Production woes plague earnings for Boeing, RTX and Spirit Aero. After a succession of production snafus, investors will question whether U.S. aerospace’s “problem children” – Boeing (BA.N), RTX (RTX.N) and Spirit AeroSystems (SPR.N) – can stem financial losses and hit year-end targets.
All three companies are expected to report losses in their third-quarter results as they struggle to resolve manufacturing defects on their most profitable aircraft and engine products.
RTX engine subsidiary Pratt & Whitney disclosed in September it will take a $3bn charge in the quarter after planning to replace components containing contaminated metal powder on as many as 700 Geared Turbofan (GTF) engines.
Meanwhile, Boeing and Spirit, a supplier for the U.S. planemaker and European rival Airbus (AIR.PA), are contending with a lapse involving misdrilled holes on Boeing’s 737 MAX. Boeing expanded inspections this month.
Vertical Research Partners analyst Rob Stallard called the companies the sector’s “problem children.”
RTX is expected to report a loss of 74 cents per diluted share versus a profit of 94 cents a year ago, according to analysts polled by LSEG.
Boeing is expected to report a loss of $2.23 per diluted share, compared with a loss of $5.49 a year ago. Spirit is projected to report a loss of $1.03 a share, compared to a loss of $1.22 a year earlier, according to LSEG data.
RTX, the first to release results on Tuesday, will face continued scrutiny about the GTF engine issue.
Analysts are concerned shop visits could drag on longer than expected or that a higher volume of engines – or additional engine types – could be affected, triggering higher compensation to customers.
“Some of these customer concessions might come in the form of free services, which are likely staggered and may drag out the cash recognition,” Bank of America analyst Ron Epstein said.
Boeing investors will fixate on 2023 free cash-flow generation, which the planemaker projected would finish between $3 bn and $5 bn. It reports results on Wednesday.
The target may no longer be achievable if Boeing can no longer meet its goal of delivering 400 737s this year.
“It was already looking like it was going to be a struggle to hit that 2023 guidance. It’s more of a struggle now, even at the low end,” Vertical’s Stallard said.
Spirit, which reports Nov. 1, has already revealed preliminary results as part of a new price agreement with Boeing.
But the earnings call will be a test for newly-named interim CEO Patrick Shanahan, a former Boeing executive and Spirit board member known for fixing tough operational problems.
“The appointment of Pat shows one thing: the criticality of the situation at Spirit right now,” said Michel Merluzeau, director of aerospace analysis at AIR consultancy group.
Investors will be looking for details on how Shanahan plans to restore the embattled supplier’s balance sheet and get aircraft production back on track, he said. (Source: Reuters)
24 Oct 23. Why Kromek shares are a bargain buy.
The radiation specialist has been unfairly hit in the market sell-off
- Management confirms full-year guidance
- New £5.5mn secured-term loan
- CZT detectors integrated into next generation medical scanners
Sedgefield-based Kromek (KMK:3.2p), a radiation detection technology company, announced an important refinancing of its debt facilities a few weeks ago, even if the share price fails to acknowledge it.
A new secured term loan of £5.5m is being provided by the investment vehicle controlled by Dr Graeme Speirs who holds a 9.6 per cent shareholding in the company. It carries an interest rate of 9.5 per cent, 0.4 percentage points more than the previous £5mn facility with HSBC, and is due for repayment in March 2025. Kromek has the option of paying the £118,750 quarterly interest charge by issuing new shares.
Although the refinancing has reduced financial risk and should enable investors to focus on the company’s improving operational performance, Kromek’s shares are trading a third below the placing price when the group raised £7.4m in May 2023. Moreover, analysts at both Equity Development and house broker Cavendish forecast a move into cash profitability in the financial year to 30 April 2024, pencilling in cash profit of £0.9m on a fifth higher revenue of £21m. Forecast closing net debt of £1.7m (ED) to £2.5mn (Cavendish) is comfortably within Kromek’s total borrowing facilities of £8.8m.
strong and growing order book. Kromek received a boost last month when one of its key customers, Spectrum Dynamics Medical, introduced the company’s medical imaging scanners. As the only commercial independent global supplier of the technology, Kromek is well-placed to capitalise on the widespread adoption of next-generation nuclear medical imaging, which offers superior performance.
Geopolitical uncertainty to buoy demand for dirty bomb detectors
Geopolitical instabilities are also playing into Kromek’s hands, underpinning demand for its CZT-based dirty bomb’ detectors which protect buildings and critical infrastructure against nuclear threat. Recent events in Israel and Palestine only highlight the need for sovereign states to protect their borders and citizens. Bearing this in mind, Kromek’s distribution agreement with Smiths Detection covers territories in both the Middle East and Asia. The company’s technology is also being used in the development of government-funded biological threat detection systems in both the US and the UK.
Kromek has secured its financing, and analysts at Equity Development predict a trebling of cash profit to £2.6m on a fifth higher revenue of £25.1m in the 2024-25 financial year. Therefore an enterprise valuation of eight times forward cash profit is a modest rating. I am not the only one thinking this way as both Equity Development and Cavendish have fair value eight times higher than the current share price. The derating since the annual results (‘Kromek’s 44% revenue boost underlines why it’s a buy’, 27 July 2023) is overdone. Buy. (Source: Investors Chronicle)
23 Oct 23. Hexcel Reports 2023 Third Quarter Results. Hexcel Corporation (NYSE: HXL):
- Q3 2023 Sales were $420m, an increase of 15.0% over Q3 2022 sales of $365 m (13.2% increase in constant currency).
- Q3 2023 GAAP diluted EPS of $0.45 compared to Q3 2022 GAAP diluted EPS of $0.31.
- Q3 2023 adjusted diluted EPS of $0.38, compared to Q3 2022 adjusted diluted EPS of $0.33.
- FY 2023 guidance is reaffirmed.
Free cash flow is cash from operations less capital expenditures.
Hexcel Corporation (NYSE: HXL) today reported third quarter 2023 results including net sales of $420m and adjusted diluted EPS of $0.38 per share.
Chairman, CEO and President Nick Stanage said, “Year-over-year third quarter sales increased 15% reflecting the continued robust growth in Commercial Aerospace and Business Jets along with the sustained strong demand in our Space and Defense markets. As we previously forecasted, the third quarter was seasonally impacted, and this combined with some general Commercial Aerospace market supply chain challenges, led to the lower sequential sales level. We delivered double-digit operating margin of 10.2% and an adjusted EPS of $0.38, an increase of 15% year over year. Year to date adjusted EPS has now increased nearly 57% year over year. Hexcel is well positioned, with infrastructure and headcount in place, to meet the expected strong growth ahead driven by the record backlog levels for new commercial aircraft. Our continued focus and strong execution led to Cash from Operations of $68m compared to $38 m in the third quarter of 2022. We remain committed to delivering our guidance for 2023, including expectations for strong free cash flow generation in the fourth quarter.”
Sales in the third quarter of 2023 were $419.5m compared to $364.7m in the third quarter of 2022.
- Commercial Aerospace sales of $251.9m for the third quarter of 2023 increased 20.5% (19.2% in constant currency) compared to the third quarter of 2022. Sales growth was driven by the Airbus A350 and Boeing 787 programs while third quarter total narrowbody sales were unchanged from the comparable prior year period. Other Commercial Aerospace increased 20% for the third quarter of 2023 compared to the third quarter of 2022 with business jets leading the growth.
Space & Defense
- Space & Defense sales of $128.8m increased 18.6% (17.1% in constant currency) for the quarter as compared to the third quarter of 2022. The sales growth was across a broad number of US and international programs.
- Total Industrial sales of $38.8m in the third quarter of 2023 decreased 17.4% (21.3% in constant currency) compared to the third quarter of 2022. Strong automotive sales growth did not offset further decline in Hexcel’s wind energy sales, which is reflective of the challenges facing the global wind industry.
Gross margin for the third quarter of 2023 was 21.8% compared to 22.4% in the third quarter of 2022. The company’s infrastructure is positioned to support higher growth rates forecasted, however given the expected softer seasonal sales, margins were impacted in the current period. As a percentage of sales, selling, general and administrative and R&T expenses for the third quarter of 2023 were 11.6% compared to 11.1% for the third quarter of 2022. Adjusted operating income in the third quarter of 2023 was $42.8m or 10.2% of sales, compared to $41.2m, or 11.3% of sales in 2022. A pre-tax net gain of $0.8m is included in other operating income in the third quarter of 2023 from the sale of a facility in Windsor, Colorado. Foreign exchange rates had no impact on operating income as a percent of sales in the third quarter of 2023 compared to the third quarter of 2022.
Year-to-Date 2023 Results
Sales for the first nine months of 2023 were $1,331.5m compared to $1,148.3m, a 16.0% increase from the same period in 2022.
Commercial Aerospace (60% of YTD sales)
- Commercial Aerospace sales of $800.7m increased 22.1% (21.5% in constant currency) for the first nine months of 2023 compared to the first nine months of 2022, with growth driven by the Airbus A350 and A320neo programs and the Boeing 787 program. Other Commercial Aerospace increased 18.9% for the first nine months of 2023 compared to the same period in 2022, on growing business jet sales.
Space & Defense (30% of YTD sales)
- Space & Defense sales of $392.5m increased 15.9% (15.5% in constant currency) for the first nine months of 2023 as compared to the first nine months of 2022. Broad-based growth drove the sales increase including US and international military helicopters and international fixed-wing aircraft programs.
Industrial (10% of YTD sales)
- Total Industrial sales of $138.3m in the first nine months of 2023 decreased 10.2% (10.9% in constant currency) compared to the first nine months of 2022 as lower wind energy sales were only partially offset by growth in automotive sales.
Gross margin for the first nine months of 2023 was 24.8% compared to 22.5% in the prior year period benefiting from higher sales volume leverage. As a percentage of sales, selling, general and administrative and R&T expenses for the first nine months of 2023 were 12.2% compared to 12.3% for the first nine months of 2022. Adjusted operating income for the first nine months of 2023 was $167.6 m or 12.6% of sales, compared to $117.0m or 10.2% of sales in 2022. Other operating income for the first nine months of 2023 included a pre-tax net gain of $0.8 m from the sale of the Windsor, Colorado facility offset by restructuring costs. Other operating income for the first nine months of 2022 included a pre-tax net gain of $19.4m from a property sale in California, partially offset by restructuring costs. The impact of exchange rates on operating income as a percent of sales was favorable by approximately 40 basis points in the first nine months of 2023 compared to the first nine months of 2022.
Cash and other
- Net cash provided by operating activities in the first nine months of 2023 was $98.1m, compared to $56.4m for the first nine months of 2022. Working capital was a cash use of $112.1m for the first nine months of 2023 and a use of $115.0m for the comparable period in 2022. The strong focus on inventory continues, resulting in an inventory reduction in the third quarter of 2023. Capital expenditures on a cash basis were $94.4 m for the first nine months of 2023 including approximately $38 m for the purchase of the land and building at the Hexcel Amesbury, Massachusetts facility. Capital expenditures for the first nine months of 2022 were $58.3 m. Net cash used for investing activities for the nine months ended September 30, 2023 included net proceeds of $10.3m received from the sale of the Colorado facility. Net cash used for investing activities for the nine months ended September 30, 2022 included the net proceeds of $21.2m received from the sale of a facility in California. Free cash flow was $3.7m in the first nine months of 2023, which includes the Massachusetts property purchase, and does not include the property sale in Colorado. This compares to ($1.9)m in the first nine months of 2022. Free cash flow is defined as cash generated from operating activities less cash paid for capital expenditures. Capital expenditures on an accrual basis were $88.7m and $49.1m for the first nine months of 2023 and 2022, respectively.
- The Company used approximately $30 m to repurchase shares of its common stock during the third quarter. The remaining authorization under the share repurchase program on September 30, 2023 was $187m.
- As announced today, the Board of Directors declared a quarterly dividend of $0.125 per share payable to stockholders of record as of November 3, 2023, with a payment date of November 13, 2023.
- The underlying effective tax rate for 2023 is now expected to be 21%, representing a decrease from the prior expectations of 23%.
- Sales of $1.765 bn to $1.835bn
- Adjusted diluted earnings per share of $1.80 to $1.94
- Free cash flow of greater than $110m
- Accrual basis capital expenditures of approximately $130 m
- Underlying annual effective tax rate is estimated to be 21% (previously 23%)
Hexcel Corporation is a global leader in advanced lightweight composites technology. We propel the future of flight, energy generation, transportation, and recreation through excellence in providing innovative high-performance material solutions that are lighter, stronger and tougher, helping to create a better world for us all. Our broad and unrivaled product range includes carbon fiber, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, resins, engineered core and composite structures for use in commercial aerospace, space and defense, and industrial applications.
(Source: BUSINESS WIRE)
23 Oct 23. Salentis (UK) Ltd forms strategic partnership with marketing and communications agency, Chamois. Salentis (UK) Ltd, a specialist defence bid proposal company, has formed a strategic partnership with Chamois Consulting Ltd that places Chamois as their preferred supplier for marketing and communications support. The partnership combines the Salentis innovative, market leading bid proposal expertise, with Chamois’ extensive defence sector PR and marketing capabilities.
For Salentis, adding Chamois’ services to their offering allows them to deliver tailored and targeted corporate campaign communications services to their clients, with whom they’re writing major bids and proposals. For Chamois, it allows them to offer a wider range of services to their own client portfolio, along with some other key strategic associations, that helps them to deliver exactly what their clients need.
Salentis (UK) Ltd is part of Salentis International, a globally renowned defence sector proposal support company. Salentis delivers full turnkey, end-to-end proposal support, with capabilities extending to all services from systematic, disciplined bid management, thorough capture management, fully integrated on-message graphics support, through to full compliance-oriented review expertise. Salentis differentiates from other bid support companies by bringing business acumen to every bid. They lead the way in helping clients to define and articulate their wider strategic defence objectives and weaving them seamlessly into polished proposal submissions.
On the Chamois side, Jody Probert OBE will be the account lead for the partnership and brings a wealth of corporate and transformation expertise to the team. Previously, he spent 5 years as a Bid Director in defence and central government leading the creation of proposals for large corporate organisations, successfully securing over £6bn in contract award revenue.
Jamie Clarke, CEO at Chamois said, “I am delighted to announce this strategic partnership with Salentis today. Securing this relationship with such a well-respected and market leading company aligns perfectly with the Chamois strategy to expand our portfolio and extend our services. Here at Chamois we have created a range of associations and partnerships. This allows us to deliver a wider service offering and with this partnership, we can extend our marketing and PR support into the world of exceptional bid and proposal campaign management and at the same time offer bid and proposal expertise to our clients. I have known Richard Haldenby, CEO at Salentis International, for many years and we share the same values, vision and commitment for what is an important partnership for both companies.”
Richard Haldenby, CEO at Salentis International said, “Chamois is a best-of-breed marketing and PR agency and we are extremely confident our relationship will deliver campaign communications excellence and tangible benefit to Salentis. Our combined expertise and value driven approaches represent a completely complementary partnership, which has the potential to extend well beyond our UK and European business into our work in the Americas and APAC. I am delighted to have Chamois on board as a partner of choice where they can help us to communicate elements of our customers’ campaigns more widely, to support specific and key bids and proposals. Welcome to our team Chamois.”
20 Oct 23. Terran Orbital Receives NYSE Continued Listing Standards Notice. Terran Orbital Corporation (NYSE: LLAP), a global leader in satellite-based solutions primarily serving the aerospace and defense industries (the “Company”), today announced that, on October 20, 2023, it received written notice from the New York Stock Exchange (the “NYSE”) that it is not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price of the Company’s common stock was less than $1.00 per share over a consecutive 30 trading-day period. The NYSE notice does not result in the immediate delisting of the Company’s common stock from the NYSE.
In accordance with applicable NYSE rules, the Company plans to notify the NYSE that it intends to cure the stock price deficiency and return to compliance with the applicable NYSE continued listing standards. The Company can regain compliance at any time within a six-month cure period following its receipt of the NYSE notice if, on the last trading day of any calendar month during such cure period, the Company has both: (i) a closing share price of at least $1.00 and (ii) an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of the applicable calendar month. The Company intends to remain listed on the NYSE and is considering all available options to regain compliance with the NYSE’s continued listing standards, including, but not limited to, a reverse stock split, subject to stockholder approval. Section 802.01C provides for an exception to the six-month cure period if the action required to cure the price condition requires stockholder approval, in which case, the action needs to be approved by no later than the Company’s next annual stockholder’s meeting.
The NYSE notice has no immediate impact on the listing of the Company’s common stock, which will continue to be listed and traded on the NYSE during such cure period, subject to the Company’s compliance with other NYSE continued listing standards. Furthermore, the Notice is not anticipated to impact the ongoing business operations of the Company or its reporting requirements with the U.S. Securities and Exchange Commission. (Source: BUSINESS WIRE)
15 Oct 23. Viasat’s interim update on VS-3 F1 satellite status. Viasat, Inc. (NASDAQ: VSAT) has reported key financial developments that are expected to materially enhance Viasat’s cash generation profile — as a result of these developments, Viasat now expects to reach the inflection point of sustainable positive free cash flow during the first half of calendar 2025, rather than the second half, as previously announced, excluding the positive impact of satellite insurance proceeds.
Since the closing of the Inmarsat transaction in May 2023, and during the subsequent integration, Viasat has engaged in a comprehensive assessment of its operating cost structure and capital allocation strategy. This assessment has also been intertwined with the root cause analysis related to the ViaSat-3 F1 satellite, which, as previously announced, encountered a mechanical deployment issue. As this work progresses, Viasat has updated its views on operating and capital expenses, and resulting cash flow expectations as follows:
ViaSat-3 F1 Update
In connection with the ongoing root cause analysis, Viasat has determined that, while the satellite payload is functional, it expects to recover less than 10% of the planned throughput on ViaSat-3 F1. With the flexibility and agility of its integrated satellite fleet, the limited ViaSat-3 F1 capacity, the addition of the next two ViaSat-3 generation satellites, ground network mitigations, and third-party bandwidth commitments, the Company remains confident that it will meet the current and future needs of its mobility customers and is well-positioned to achieve its financial growth objectives. Viasat also confirmed that it has insurance coverage of $420 m in place for ViaSat-3 F1 and will finalize its claim before the end of the year. The Company will not require a replacement satellite for ViaSat-3 F1.
Inmarsat Acquisition Synergies Update
The integration of the Inmarsat acquisition is proceeding well and is ahead of plan. Viasat synergy estimates of approximately $80 m in annual operating expenses and approximately $110 m in annual capital expenditures are now anticipated to be fully realized in FY25, versus over an approximate three-year period as originally planned. Further, Viasat expects to identify and realize additional savings in subsequent phases of the synergy program.
Capital Expense Planning
Following Viasat’s determination that a replacement for ViaSat-3 F1 is not necessary, the majority of the capital expenditures related to the ViaSat-3 constellation have been completed. Viasat is forecasting capital expenditures in FY25 to decline from FY24 and to be in the range of $1.4 bn to $1.5 bn, including completion of the final stages of the ViaSat-3 constellation and the continued build of GX satellites. This range is inclusive of capitalized interest and funding for the replacement of the capabilities of the I6 F2 satellite. Viasat is committed to meaningfully reducing aggregate capital expenditures and expects accelerated, continued declines in capital expenditures as satellites currently under construction are completed. The Company confirms that it has insurance coverage of $348 m in place for the I6 F2 satellite and will finalize its claim before the end of the year.
Viasat expects to report more than $3 bn of liquidity as of September 30, 2023, including approximately $2.0 bn of cash, cash equivalents and short-term investments with no near-term outstanding debt maturities. These preliminary estimates are subject to the closing of the second fiscal quarter of FY2024 and finalization of financial and accounting procedures and may change.
Viasat will provide more details on its next earnings call, planned for November 2023. (Source: Satnews)
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