Precision Posts Weak Numbers

Precision Castparts Corp. (PCP - Analyst Report) today reported disappointing results in its fiscal second quarter.

Sales in the quarter totaled $1.3 billion, compared to sales of $1.8 billion last year. Included in the year-over-year sales decline were the negative effects of foreign exchange of approximately $29 million, lower material pass-through of approximately $37 million, and lower selling prices of external alloys at the company's three primary mills of approximately $62 million.

Precision Castparts delivered operating income of $337 million, or 25.9% of sales, versus $404.1 million, or 22.5% of sales a year ago. Total net income from continuing operations in the quarter was $218.3 million, compared to $265.1 million in the same quarter last year. Earnings per share from continuing operations were $1.54 (diluted, based 141.6 million shares outstanding), compared to last year’s figure of $1.88 (diluted, based on 140.7 million shares outstanding).

The company took a pre-tax impairment charge of $11.6 million related to certain assets of discontinued operations. This resulted in net income including discontinued operations of $207.3 million, or $1.46 per share for the quarter, as compared to net income including discontinued operations of $269.3 million, or $1.91 per share in the same period last year.

Precision continued to focus on leveraging its operational strengths; improving operating margins from continuing operations by 3.4% points over the second quarter on 28% lower year-over-year sales. The lower sales were driven by further aerospace destocking; economic pressures on the general industrial markets, planned downtime of major forging complexes, and seasonal European holidays. However, the company completed the acquisition of Carlton just after the conclusion of the second quarter, which will help it to drive top- and bottom-line results going forward.

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