Thomas Lewis • 37 Comments
Aaron Foster, CFA
Aug. 10, 2015, 11:28 AM
- Berkshire Hathaway's (BRK.A -0.7%; BRK.B -0.6%) $37B purchase of Precision Castparts (PCP +19.1%), combined with Berkshire's FQ2 earnings report that showed profit fell 37% due to higher costs at its insurance units, appear to be striking an off note with the company's investors, sending shares lower.
- It's the biggest deal of Warren Buffett's career: BRK is paying $235/share for PCP, a 21.2% premium over Friday's closing price and 18x projected profit over a 12-month period.
- "I'm not crazy about paying $30B for a $1.5B earnings stream of a cyclical company supplying airplane makers," says Jeff Matthews, a principal at hedge fund Ram Partners and author of a book about Buffett.
- Buffett tells CNBC that Berkshire will use $23B of its own cash and borrow ~$10B to fund the deal, which he says will be the last one his firm undertakes for roughly a year as it rebuilds its cash pile.
Aug. 10, 2015, 9:13 AM
Jun. 15, 2015, 3:35 PM
- Precision Castparts (PCP +1.5%) is higher today following a favorable Barron's article this past weekend which said PCP's undervalued shares should present a "rare opportunity for long-term investors" after declining 23% since last summer amid soft orders from oil and gas outfits.
- Robust aerospace demand should compensate, the article says, as production of new planes at Boeing and Airbus is expected to rise next year and the new single-aisle 737 MAX and A320neo begin production in 2017; the next-generation engines could contain PCP parts worth 2x-3x those in older engines.
Feb. 23, 2015, 10:33 AM
- Goldman Sachs is making waves on Wall Street in early trade after downgrading the Aerospace sector to Neutral from Attractive. While the firm still views Aerospace as a long-term growth industry, it says that downside risk has been heightened after substantial outperformance.
- As part of the sector view change, Goldman also downgraded Boeing (BA -2.7%) to Sell from Neutral and Precision Castparts (PCP -2.6%) to Neutral from Buy.
- Boeing: "With a sustained lower fuel price and pockets of global growth volatility, the demand equation for aircraft could worsen, and Boeing shares are highly correlated to new aircraft orders. New aircraft supply has now doubled from the trough, and growth rates should slow." Goldman also cited concerns over large increases in deferred production of 787 jets and a potentially "less comfortable" medium-term free cash framework.
- Precision Castparts: "PCP...has now grown organically at a slower pace than the supply chain average for 11 of the last 12 quarters, which could continue for at least the next few given its Oil & Gas exposure and no visibility into the end of engine destocking." Goldman also added that the company's inventory growth and lack of converting 100% of net income to free cash are "concerning."
Jan. 16, 2015, 12:45 PM
Jan. 16, 2015, 9:11 AM
Jan. 16, 2015, 7:45 AM
- Precision Castparts (NYSE:PCP) is down 3.5% premarket after announcing that lower demand in the oil & gas markets negatively impacted its third quarter fiscal year 2015 sales and earnings.
- The company now expects FQ3 sales to be in the range of $2.42B-$2.47B and diluted EPS of $3.05-$3.10 vs. analysts’ estimates of $2.6B and $3.41, respectively.
- SEC Form 8-K
Jul. 25, 2014, 8:33 AM
Oct. 10, 2013, 10:02 AM
- Boeing (BA +2.2%) is initiated with a Buy rating and $140 price target at Canaccord Genuity, as the 787 Dreamliner continues to ramp and power revenues improve.
- The firm believes BA will continue to benefit from strong industry fundamentals and should see further upside to current production levels; improving cash flows and cash deployment will be key drivers for the stock.
- Canaccord also awards Buy ratings to airplane/aerospace suppliers Precision Castparts (PCP +2.7%), TransDigm (TDG +1.2%), B/E Aerospace (BEAV +2.3%) and Hexcel (HXL +2.3%).
Jul. 12, 2013, 12:46 PM
Precision Castparts (PCP -4.2%) shares sink along with Boeing (BA -6.5%) on news of a fire on a 787 at Heathrow Airport. PCP has large exposure to the continuing manufacturing of 787 aircraft and has been seen as a major beneficiary of a production ramp-up into 2014. Update: Heathrow says no passengers are aboard the parked plane, and arriving and departing flights are suspended.| Jul. 12, 2013, 12:46 PM | 2 Comments
May 9, 2013, 10:27 AM
More on Precision Castparts' (PCP +9%) FQ4 : This quarter's performance is "only an initial data point on a long continuum for improved performance," CEO Mark Donegan says. Revenues posted Y/Y growth in every segment, including a 31% sales increase in forged products (the biggest revenue contributor) driven largely by the integration of Timet, which the company acquired in January for $2.9B. "We are just beginning to scratch the surface of" the value the acquisition can create, management notes. (PR)| May 9, 2013, 10:27 AM | 1 Comment
Jan. 24, 2013, 6:15 AMPrecision Castparts (PCP): FQ3 EPS from continuing operations of $2.32. Revenue of $2.04B (+13% Y/Y) misses by $0.07B. Shares -1.2% premarket. (PR) | Jan. 24, 2013, 6:15 AM
Dec. 19, 2012, 9:28 AM
Nov. 12, 2012, 2:48 PM
The Precision Castparts (PCP +4.5%) deal to acquire Titanium Metals (TIE +42.4%) has a “go shop" provision, allowing a TIE committee to solicit higher bids for 45 days, but D.A. Davidson sees the deal going through, believing the timing of the deal is driven by uncertainty about capital gains taxes in 2013, with "every incentive to get it done before the year end."| Nov. 12, 2012, 2:48 PM
Nov. 12, 2012, 9:10 AM
Nov. 12, 2012, 8:46 AM
Titanium Metals (TIE) +43% premarket on Friday's news that it agreed to be acquired by Precision Castparts (PCP) for $16.50/share, a 43% premium to the metal products company's Friday closing price. Since PCP was TIE's biggest customer, cost reductions from the deal should be significant, analysts say, and PCP has shown an ability to integrate acquisitions smoothly. PCP +4.2%.| Nov. 12, 2012, 8:46 AM