Goodrich Rides Past Estimates

Before the markets opened, Goodrich Corporation (GR - Analyst Report) announced its fourth quarter and fiscal 2011 results. Its fourth quarter earnings were $1.85 per share handsomely surpassing both the Zacks Consensus Estimate of $1.57 and the year-ago number of $1.16 per share. The results were driven by sales growth in the company’s all the major market channels, and strong operational performance.

Goodrich reported fiscal 2011 earnings per share of $6.33 versus $4.51 in the year-ago quarter and the Zacks Consensus Estimate of $5.99. The year-over-year increase reflects higher sales growth in all of the company's major market channels, strong operational performance, cost reduction initiatives, higher favorable changes in estimates for certain long-term contracts and lower pension expense.

Revenue

Goodrich's total operating revenue in fourth quarter 2011 was $2,145.0 million, up 19% from $1,806.2 million in the year-ago quarter. The results of the company were also higher than the Zacks Consensus Estimate of $2,126 million.

In fiscal year 2011, total operating revenue was $8,074.9 million versus $6,966.9 million in fiscal year 2010 and the Zacks Consensus Estimate of $8,069.0 million.

Segmental Revenue

Actuation and Landing Systems: In fourth quarter 2011, revenues from this division rose 24% to $791.3 million from $639.2 million in the year-ago quarter. The segment’s operating income of $113.3 million increased 78% from $63.7 million in the fourth quarter 2010. Operating margin rose to 14.3% from 10.0% in the year-ago quarter.

Nacelles and Interior Systems: In fourth quarter 2011, revenues from this division rose 20% to $746.4 million from $623.6 million in the year-ago quarter. Segmental operating income shot up 36% to $203.1 million from $148.9 million in the year-ago quarter. Operating margin also rose to 27.2% from 23.9% in the year-ago quarter.

Electronic Systems: In fourth quarter 2011, revenues from this division rose 12% to $607.3 million from $543.4 million in the year-ago quarter. Segmental operating income climbed 45% to $105.3 million from $72.7 million in the year-ago quarter. Operating margin increased to 17.3% from 13.4% in the year-ago quarter.

Financial Update

Goodrich ended fiscal 2011 with cash and cash equivalents of $987.0 million versus $798.9 million at fiscal-end 2010. Long-term debt and capital lease obligations at fiscal-end 2011 was $2,374.4 million versus $2,352.8 million at fiscal-end 2010.

In fourth quarter 2011, Goodrich reported net cash from operating activities of $455 million, an increase of $568 million from the same period in 2010.  The increase was due primarily to lower pension contributions, higher income from continuing operations and favorable changes in working capital.  During the fourth quarter 2011, Goodrich contributed $10 million to its worldwide pension plans, compared with contributions of $313 million in the fourth quarter 2010. Capital expenditures were $140 million in the reported quarter compared with capital expenditures of $123 million in the fourth quarter 2010. 

In fiscal year 2011 net cash from operating activities was $863 million, an increase of $571 million from the same period in 2010.  The increase was due primarily to lower pension contributions and higher income from continuing operations.  During fiscal year 2011, Goodrich contributed $91 million to its worldwide pension plans, compared with contributions of $444 million in fiscal year 2010.  Capital expenditures were $318 million during fiscal year 2011, compared with capital expenditures of $222 million during fiscal year 2010.

Outlook

Earlier in September 2011, United Technologies Inc. (UTX - Analyst Report) had announced that it would acquire Goodrich for $18.4 billion. The deal is expected to close by the first half of 2012, subject to regulatory approvals and shareholder vote for merger approval scheduled for March 13, 2012.

Goodrich currently retains a Zacks #3 Rank (Hold rating), which is supported by our longer-term Neutral recommendation.

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