What We’re Reading

Content Summary

In this June edition of our Aerospace, Defense & Government Services industry update, we review recent articles and developments impacting our target end markets. We also provide perspective on recent trends within the public markets as well as the M&A markets.

Opinion: #Transparency Is Boeing’s Achilles' Heel

“The Boeing 737 MAX situation reminds us that jetliner groundings, while rare, have always been with us. In 1979, the FAA grounded the McDonnell Douglas DC-10 following concerns that a weak left engine mount had caused the crash of an American Airlines flight in Chicago, killing 273 people. This followed a 1974 Turkish Airlines DC-10 crash with 346 fatalities, thanks to a faulty cargo door design. Dogged by high fuel burn and a perception that it was operationally unsafe, McDonnell Douglas terminated production in 1983.”

Aviation Week

Luckily for Bizjet-Makers, China Is Not Asia’s Only Market

“It is a case of Southeast Asia to the rescue. As demand for business jets slumped last year in China, the countries to the south stepped up. The overall Asia-Pacific fleet has barely grown, though trade in secondhand aircraft looks brisk. Notably, quite a few business jets have left China.”

Aviation Week

Turkey Presses Ahead with Indigenous Fighter Development

“Turkey’s grand ambition to broaden its indigenous defense industry is beginning to generate returns, yet its vision of becoming one of the world’s top 10 arms suppliers remains intertwined with its increasingly fragile relationship with the U.S. and NATO. Istanbul’s IDEF defense exhibition revealed the extraordinary extent of the country’s defense development efforts. From the TF-X fighter aircraft and main battle tanks to electro-magnetic railguns and antidrone lasers, technology projects have brought about an impressive engineering and skills base and are inspiring a new generation of engineers.”

 Aviation Week

To Counter China, Pentagon Wants to Create Patriotic Investors

“Faced with Chinese tactics of creating private equity firms and investing in American technologies, the Pentagon is preparing a new tool, one it hopes will lead domestic investors to increase spending in companies vital for the defense-industrial base. Ellen Lord, the Pentagon’s top acquisition official, unveiled the launch of the Trusted Capital Marketplace program, or TCM, on Friday, a public-private partnership that will convene trusted sources of private capital with innovative companies critical to the defense-industrial base and national security.”

Defense News

Perspective on Public Marketsa,b,1

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Most Significant Stock Price Movement – April 30th to May 31st

screen_shot_2019-06-13_at_11.51.52_am.pngStock price surged after sales and earnings out performance in the first quarter and expected military support for the Valkyrie drone

 

 

 

screen_shot_2019-06-13_at_11.52.26_am.pngOutperformance driven by strong YoY sales increases primarily attributed to record strength in Aerospace segment

 

 

 

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Mixed investor sentiment as Triumph continues its aggressive divestiture strategy and struggles to generate organic growth

 

Recent M&A Transactions2

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picture1_319.pngIndicates disclosed enterprise values in millions USD, unless denoted with “B” (billion)

a. Current stock prices in USD as of 5/31/19

b. Aircraft OEMs: BA, BBD.B, EADS, ERJ

         Aerospace Supply Chain & Aftermarket Support: AIR, ARNC, ATRO, B, BBA, DCO, HEI, HRX, HXL, KAMN, MAL, MGGT, MOG.A, ROLL,
         SAF, SNR, SPR, TDG, TGI, WAIR, WWD

         Diversified Industrial: AME, CR, CW, ETN, GE, HON, PH, RR, TXT, UTX

         Defense Prime Contractors: BA, BAE, EADS, GD, HO, HII, LMT, NOC, RTN

         Defense Technologies: AVAV, CHG, CMTL, COB, CUB, ESLT, FLIR, HRS, KTOS, LLL, MRCY, TDY, ULE

         Government Services: BAH, CACI, KEYW, LDOS, MANT, SAIC, VEC

         Diversified Services: ACM, BAB, FLR, GIB, ICFI, JEC, KBR, SRP

 

1. FactSet

2. Mergermarket

 

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