By Doug Cameron And Josh Beckerman
Precision Castparts Corp. on Thursday joined the ranks of
manufacturers hit by falling sales to the oil and gas industry,
though it said its aerospace unit remains poised for growth as
Airbus Group NV and Boeing Co. boost production.
The Portland, Ore., company said demand from oil and gas
customers started to deteriorated late in the final quarter of
2014, and gave preliminary sales and profit figures that fell short
of analysts' expectations.
The statement after the market close followed the announcement
earlier Thursday by Schlumberger Ltd., the world's largest
oil-field services company, of a drop in profit alongside plans to
lay off 9,000 workers.
Precision Castparts generated a quarter of its $9.6 billion in
sales in fiscal 2014 from the energy and power markets. Alongside
some other aerospace and defense companies--including B/E Aerospace
Inc. and Huntington Ingalls Industries Inc.--it has targeted the
oil and gas sector as a growth market where it could apply its
advanced engineering technology.
The stumble in Precision Castparts' energy business follows a
prolonged period of market underperformance that analysts have
attributed to destocking by aerospace customers and confusion among
investors over its financial targets.
The company doesn't provide quarterly financial guidance, while
analysts have said its long-term financial targets are becoming
tougher to reach.
Its share price has fallen 19% over the past year, versus a 4%
drop in the broader aerospace market, reducing its market value to
$31.7 billion. The shares were down 3.1% at $213 in aftermarket
trade.
Howard Rubel, an analyst at Jefferies, said in a client note
that its challenges in the oil and gas market are likely to
persist, lowering sales growth in fiscal 2015 and 2016.
Precision Castparts said earnings from continuing operations in
its fiscal third quarter ended December were expected to be between
$3.05 and $3.10 a share. Analysts polled by Thomson Reuters had
projected $3.41.
The company expects sales of $2.42 billion to $2.47 billion in
the quarter, compared with analysts' estimates of $2.57
billion.
It also cited a number of smaller inventory-related issues in
the past quarter, mainly in its aerospace business, though it was
upbeat about the segment. Its products are on most large commercial
jets--including more than $10 million in parts on each Boeing
787--and it has been expanding its market share in airframe and
engine components.
"Despite these challenges, the momentum in our aerospace
business continues, and we have already begun to deliver the
inventory deferred in the third quarter and expect to realize those
sales in the fourth quarter," Mark Donegan, chairman and chief
executive, said in a statement.
The company is due to discuss the quarter when it releases full
earnings on Jan. 22.
Write to Doug Cameron at doug.cameron@wsj.com and Josh Beckerman
at josh.beckerman@wsj.com
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