This week saw U.S. companies issue their 4th Quarter 2018 financial reports and projections for 2019.
The following, courtesy of Seeking Alpha, are highlights from this week’s reporting of major U.S. aerospace prime contractors:
- Record core operating earnings grew 8% Y/Y to $5.48 per share vs. $5.07 per share in the same quarter a year ago.
- Revenue by segment: Commercial Airplanes +14%; Defense, Space & Security +16%; Global Services +29%.
- Booked 262 net orders in Q4 and delivered 238 commercial airplanes, including the delivery of the 787th 787 Dreamliner and the first 737 MAX Boeing Business Jet.
- Backlog remains robust with more than 5,900 commercial airplanes valued at $412B.
- Operating cash flow of $2.9B; repurchased 1.6M shares for $600M; paid $1B in dividends; cash and marketable securities of $8.6B; completed the acquisition of KLX.
- Outlook for 2019: Core EPS of $19.90-$20.10; Revenues of $109.5B-$111.5B; Commercial deliveries of 895-905 planes.
- Earnings per diluted share from continuing operations increased 19% to $1.96.
- Revenue by segment: Communication Systems +10%; Electronic Systems, +6%; Space and Intelligence Systems +11%.
- “Integration planning for the merger with L3 is progressing well, with the integration team fully staffed and developing detailed plans to deliver $500M of cost synergies and ensure seamless operations post close,” said CEO William Brown. “We continue to expect the transaction to close in mid-2019.”
- The company also had its most active launch quarter to date: Three small satellites, the GPS SV01 and two international launches.
- Raised guidance for fiscal 2019: EPS from continuing operations of $7.90-$8.00 (from $7.80-$7.90), revenue in a range of $6.66B-6.69B (up 6-8% from previous guidance).
- Diluted earnings per share from continuing operations of $3.07, up 46.2% from the quarter a year ago.
- Revenue by segment: Aerospace +36.4%; Combat Systems -0.2%; Information Technology +93.3%; Mission Systems -0.3%; Marine Systems +11.5%.
- Repurchased 7.6M shares during the quarter. Total backlog at the end of 2018 was $67.9B, up 7.4% from 2017.
- Net earnings of $1.3B, or $4.39 per share, compared to a net loss of $744M, or $2.60 per diluted share, in the same quarter a year ago.
- Sales by segment: Aeronautics +4%; Missiles and Fire Control +22%; Rotary and Missions Systems -4%; Space +2%.
- Quarterly cash deployment: Capex of $459M; Repurchased 2.2M shares; Paid cash dividends of $622M; Record backlog of $130.5B.
- Outlook for 2019: Diluted earnings per share of $19.15-$19.45, below Wall Street’s expectation of $19.57 a share according to FactSet, on net sales of about $55.75B-$57.25B.
- Retrospectively adopted the mark-to-market method of accounting for pension and other post-retirement benefits (MTM) as of Dec. 31, 2018 and revised prior period results to reflect that change.
- As a result, MTM-adjusted Q4 diluted earnings per share increased 224% to $4.93, driven by the addition of Innovation Systems in 2018 and the impacts related to the Tax Cuts and Jobs Act in 2017.
- Sales by segment: Aerospace +6%; Mission +2%; Technology -8%.
- Outlook for 2019: MTM-adjusted EPS of $18.50-$19.00 (below analysts’ forecasts of $19.49 per share), on sales of approximately $34B (below estimates of $34.21B).
- EPS from continuing operations rose 117% Y/Y to $2.93 vs. $1.35 in the fourth quarter 2017. The increase was primarily driven by operational improvements and lower taxes primarily associated with tax reform.
- Revenue by segment: Integrated Defense Systems +8%; Intelligence, Information and Services +9%; Missile Systems +6%; Space and Airborne Systems +13%.
- The company reported bookings of $8.4B (vs. $8.5B in the fourth quarter 2017), resulting in a book-to-to bill ratio of 1.15.
- Backlog at the end of Q4 was a record $42.4B, an increase of approximately $4.2B or 11% compared to quarter a year ago.
- Repurchased 2.3M shares of common stock for $400M during the quarter.
- Outlook for 2019: EPS from continuing operations to $11.40-$11.60, on sales of $28.6B-$29.1B. Operating cash flow of $3.9B-$4.1B.
United Technologies (UTX)
- This is UTX’s first earnings release since completing its $30B acquisition of Rockwell Collins in November and announcing its intent to separate into three independent companies.
- Reported bookings of $8.4B (vs. $8.5B in the fourth quarter 2017), resulting in a book-to-to bill ratio of 1.15.
- Q4 commercial aftermarket sales rose 11% Y/Y at Pratt & Whitney and gained 8% organically at Collins Aerospace Systems; Otis new equipment orders were flat organically, and equipment orders at Carrier increased 3% organically.
- For FY 2019, UTX sees EPS of $7.70-$8.00, excluding non-recurring items, vs. $7.80 analyst consensus estimate on revenues of $75.5B-$77B vs. $77.1B consensus.
- Looking to 2019, segment profit is expected to grow faster than sales, and free cash flow, excluding separation costs, is expected to grow faster than earnings,” the company says.