Wesco Aircraft Misses, Gives Outlook

Wesco Aircraft Holdings, Inc. ( WAIR - Snapshot Report ) reported first quarter fiscal 2013 results. Earnings of 25 cents per share were down by a penny from the year-ago figure of 26 cents per share. Wesco Aircraft also missed the Zacks Consensus Estimate by 2 cents.

Including one-time items of 6 cents per share related to amortization of intangible assets and amortization of deferred financing costs, GAAP earnings reported by the company were 19 cents per share, down from 24 cents per share.

The results reflect lower gross margins due to changes in the hardware sales mix, lower margin electronic product sales growing more rapidly than hardware sales and addition of SG&A costs associated with the Interfast business. However, these were partially offset by higher sales due to the acquisition of Interfast and a lower tax rate.

Total Revenue

Sales for the reported quarter increased 9.7% to $211.2 million from $192.6 million in the year-ago quarter. However, the figure was lower from the Zacks Consensus Estimate of $218 million.

Segment revenue from North America was up 10.3% year over year attributable to acquisition of Interfast Inc. Segment revenue from Rest of World was also up by 32.9% year over year driven by strong international growth.

Adjusted earnings before interest tax, depreciation and amortization (EBITDA) were $43.6 million, down 8.1% year over year. Selling, general and administrative expenses were $34.7 million, up from $28.2 million in the year-ago quarter.

Financial Condition

Cash and cash equivalents as of Dec 31, 2012 were $39.7 million, down from $44.7 million as of Dec 31, 2011. Long-term debt as of Dec 31, 2012 was $593.8 million, up from $531 million at the end of the first quarter of 2012.

Capital expenditure, during the quarter under review, was $597 million versus $644 million in the year-ago quarter.

Guidance

The company maintained its top-line guidance for fiscal 2013 in the range of $865 million to $890 million. It expects adjusted earnings per share to be in the range of $1.14 to $1.19 per share.

Our Take

Wesco Aircraft’s top and bottom line missed this quarter. However, more bookings would help the company to achieve top- and bottom-line guidance in fiscal 2013. Moreover, integration with Interfast Inc. is progressing well and would prove beneficial for the company, going forward. However, these positives are offset by uncertainty related to defense budget cuts though at a lesser extent, increase in interest expenses due to increase in debt and foreign currency risk. The company currently retains a short-term Zacks Rank #4 (Sell).

Based in Valencia, California, Wesco Aircraft Holdings, Inc. distributes and provides supply chain management services to the aerospace industry in North America and internationally. The company’s services include traditional distribution, management of supplier relationships, quality assurance, kitting, just-in-time delivery, and point-of-use inventory management.

Other preferable stocks in this category are Huntington Ingalls Industries, Inc. ( HII - Snapshot Report ) with a Zacks Rank #1 (Strong Buy), Lockheed Martin Corporation ( LMT - Analyst Report ) with a Zacks Rank #2 (Buy), and Northrop Grumman Corporation ( NOC - Analyst Report ) with a Zacks Rank #3 (Hold).