Friday, April 9, 2010
Precision stock soars as aircraft sector rallies
Portland Business Journal - by Erik Siemers Business Journal staff writer
Shares of Precision Castparts Corp. have spent the last week on the verge of $130, the highest point in nearly two years thanks to an improved outlook from aircraft manufacturers.
Portland-based Precision Castparts makes critical components used mostly in aircraft manufacturing and energy markets, such as for industrial gas turbines.
But despite being one of Oregon’s two Fortune 500 companies, Precision Castparts stock price wasn’t spared by the dismal economy.
As the market imploded in October 2008, the company’s shares fell below $50 and stayed below $100 for nearly a year.
But its fortune on Wall Street is often tied directly to the performance of its largest customers, including aircraft manufacturers such as Chicago-based Boeing Co.
That explains why Precision Castparts shares began their climb around March 19, the same day Boeing announced plans to ramp up production on the 777s and 747s it builds in Everett, Wash.
Precision Castparts has more than $7 million worth of components on each Boeing 747-8 and more than $5 million in both the 787 and 747-400 models.
Since that announcement, the company’s shares have jumped from $119 to $126 as of Tuesday.
“In the past, say, 90 days, there’s been a pretty distinct about-face in the attitude and outlook for the commercial widebody (aircraft) market,” said J.B. Groh, an analyst with Lake Oswego-based D.A. Davidson & Co. “It wasn’t too long ago that we were talking about more production cuts.”
The reversal in fortune led to some favorable notes from Wall Street analysts, further leading to the surge in Precision Castparts shares.
Goldman Sachs analyst Noah Poponak on March 29 upgraded the company’s shares from “neutral” to “buy” status with a 12-month price target of $153. That would surpass the company’s all-time high of $151 reached in December 2007.
In his note, Poponak said Precision Castparts will see dual benefit as customers stop paring down inventories and ramp up manufacturing.
On Monday, Peter Arment, an analyst with Greenwich, Conn.-based Broadpoint AmTech, issued a note reaffirming his existing “buy” rating, with an even higher $160 price target.
Precision Castparts CEO Mark Donegan, speaking March 9 at the J.P. Morgan, Transportation & Defense Conference, said the company is well-positioned in the aerospace sector.
“We continue to gain traction, gain share,” he said. “As programs like 787, the 747-8, come in and get moved to production we’ve got a very, very strong position, unlike anything we’ve had in the past.”
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