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Precision Castparts Corp. (PCP - Analyst Report) reported its fourth-quarter fiscal 2014 results with net income from operations of $479 million, which increased 15.4% from $415 million in the prior-year quarter.

The reported earnings from continuing operations (excluding one time items) of $3.27 per share, beat the Zacks Consensus Estimate of $3.21 by 1.9%. However, year-over-year quarterly earnings were up 16.0% from $2.82 per share in the year-ago quarter.

Revenues

Revenues increased 3.9% year over year to $2.5 billion from $2.4 billion in the prior-year quarter, primarily driven by organic growth of 3%. The company reported strong revenue growth in two of its three operating segments, which also contributed to the top-line improvement. Revenues were in line with the Zacks Consensus Estimate of $2.5 billion.

Segment Results

Investment Cast Products revenues declined marginally by 0.9% to $629 million from $635 million in the year-ago quarter. The marginal decline includes an approximately $5 million decrease in contractual material pass-through pricing. Large commercial aerospace sales increased approximately 8%, driven by strong production schedules, with reduced military and regional/business jet shipments tempering overall segment sales. This was partially offset by a year-over-year decrease in OEM industrial gas turbine (IGT) production, while the segment's power business continued to see strong demand, driven by upgrade programs, share gains and spares sales.

Forged Products revenues also inched up 0.2% year over year to $1,120 million from $1,118 million in the prior-year quarter. Fourth quarter revenues included a year-over-year decline in alloy and revert selling prices of approximately $69 million. Large commercial aerospace sales rose approximately 5% year over year, offset by lower military sales while the business jet sales were flat. IGT sales grew about 5%, while interconnect pipe sales increased 28% year over year. The revenues from the Oil & gas shipments segments dropped by 12% in the fourth quarter.

Airframe Products revenues surged 15% year over year to $781 million, compared with $681 million in the year-ago quarter. Aerospace sales increased 17% year over year, including 5% organic growth. Demand for the segment’s Fastener 787 products has been strong, with an average of eight ship sets per month.

Margins

Consolidated segment operating income improved 15% year over year, to $720 million or 28.5% of sales, compared with $626 million, or 25.7% of sales, in the preceding year. Gross margins during the quarter contracted 285 basis points (bps) year over year to 65.0%, while operating margin increased 289 bps to 27.9% driven by strong synergies from acquisitions.

Balance Sheet

Exiting the quarter, Precision Castparts had a cash balance of $361 million, up 28.9% from $280 million as on Mar 31, 2013.

As on Mar 31, 2014, Precision Castparts had a total debt of $3.6 billion versus $3.8 billion as on Mar 31, 2013. Despite major acquisitions, the company has managed its debt well. Total capital expenditure incurred by the company in the quarter aggregated $94 million.

Precision Castparts currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include CIRCOR International, Inc. (CIR - Snapshot Report), Timken Co. (TKR - Snapshot Report) and TriMas Corporation (TRS - Snapshot Report). All three of the stocks hold a Zacks Rank #2 (Buy). 

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