What We’re Reading

Content Summary

In this September 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.

Boeing 737 Suppliers Report Minimal Disruption, Much Uncertainty

“Ramifications from Boeing’s 737 MAX production rate cut are starting to ripple through the supply chain, but comments from many suppliers suggest they will get through largely unscathed so long as Boeing’s plan for the struggling narrowbody program stays on track.”

Aviation Week

Analyst: Heavy Jets to Lead Bizjets to 2019 Gains

“Analyst Jefferies is predicting business jet deliveries to grow 8 percent overall this year with a 30 percent leap in heavy jet deliveries, thanks in part to products such as Gulfstream’s G500 and G600 and Bombardier’s Global 7500 reaching the market. Business jet deliveries in the second quarter improved 6 percent year-over-year overall and heavy jet shipments are up more than 20 percent on the quarter.”

AIN

Urban Upheaval: The Revolution Could Arrive Sooner Than Expected

“Are we on the cusp of a total disruption in urban transportation? Skeptics…have long been involved in the negatives of helicopter operations in metropolitan settings including their noise, concern over air traffic management and the safety risk to those involved as well as bystanders, and, as always, the costs associated with vertical flight. With the forgoing in mind, the speech of acting FAA Administrator Dan Elwell at the Uber Elevate Summit in Washington on June 12 was thought-provoking, to say the least.”

Aviation Week

Why Government Services M&A Deals Seem to Breeze Through Antitrust Reviews

“Constant merger-and-acquisition activity in the government market is set to stay that way, but recent trends suggest one transaction is almost certain to not close until next year’s spring or early summer: the megadeal involving Raytheon and United Technologies Corp…With consolidation seemingly happening everywhere among the market’s largest players, why do deals among services firms seem to breeze through the regulatory process quicker than those of the primes?”

Washington Technology

Perspective on Public Marketsa,b,1

screen_shot_2019-09-09_at_11.32.40_am.png

Most Significant Stock Price Movement – July 31st to August 31st

screen_shot_2019-09-09_at_11.33.28_am.pngDeclining revenues, lower than expected earnings & ongoing strategic review contributing to price decline

 

 

 

 

screen_shot_2019-09-09_at_11.34.12_am.pngStock price declined with lower than expected earnings, despite revenue outperformance

 

 

 

 

screen_shot_2019-09-09_at_11.34.47_am.pngDynamics around cash burn rate and revised revenue estimates putting downward pressure on stock price

Recent M&A Transactions2

screen_shot_2019-09-09_at_11.36.22_am.png

picture1_12.pngIndicates disclosed enterprise values in millions USD, unless denoted with “B” (billion)

a. Current stock prices in USD as of 8/31/19

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, KTOS, LHX, MRCY, TDY, ULE

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

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

 

1. CapitalIQ

2. Mergermarket

 

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