Morningstar Rating

Stock Research and Analysis

by Neal Dihora, CFA

Bulls Say

The increase in production rates announced by Boeing and Airbus, combined with new platforms such as the 737 MAX and A320neo, will power sales and profits in the near to medium term.
The firm will continue to make value-adding acquisitions that improve its product offering or enhance its internal supply of materials. Acquisitions totaled $8.4 billion over the last five years.
PCC is one of only a few manufacturers in the world that can produce large metal castings to meet the cost and quality demands of its customers. Read more 

Bears Say

PCC has little control over pricing as it serves an oligopolistic jet engine-making customer base, which itself remain pressured by the intensely competitive large aircraft manufacturers Boeing and Airbus. If PCC is unable to offset decreased pricing with cost-cutting measures, margins could suffer.
The power generation market currently has excess capacity; new turbine demand could be further out than calendar 2014.
Delays in production rate increases can leave a hole for PCC's products and result in lower incremental margins as its plants are underutilized. Read more 

Management

PCC's management has created a fully integrated supply chain by identifying and integrating acquisitions, capturing synergies across the board, and taking out costs quarter after quarter, as evidenced by the company's yearly margin expansion. GE alumnus   Read more 

Profile

Precision Castparts makes complex metal components for aerospace, power generation, and other industrial applications. Its investment castings (26% of fiscal 2014 revenue)   Read more 

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