Premium industrial goods company Kaman Corporation KAMN continues to ride on its growth track aided by lucrative organic deals. The company manufactures and sells different types of aerospace and defense products in the global industrial goods market. Holding a high brand value in the market, Kaman is regarded as the largest supplier of integrated aerostructural components, offering diversified aerostructure solutions such as designing, tooling, supporting, manufacturing and testing.
Despite sluggish industrial market and reduced defense spending, the company reported impressive results for first-quarter 2015, supported by its non-imitable business services and products. Adjusted earnings came in at 46 cents, 4.5% up year over year. Net sales amounted to $442.8 million as against $408.0 million accrued at the end of first-quarter 2014.
Being a multinational company, Kaman is exposed to several macroeconomic and industry-specific headwinds. The company encounters risks of market share loss due to extensive rivalry within the industry. Companies like RBC Bearings Inc. ROLL, The Babcock & Wilcox Company BWC and Barnes Group Inc. B are some of its business rivals. Any strategic progress on part of these peers can lower Kaman’s economic surplus in the near future. However, irrespective of such negatives, we believe the company would manage to sustain its growth momentum on the back of organic deals.
Recently, Kamans’ aerospace business segment, Kaman Aerosystems, inked a five-year Memorandum of Understanding (‘MOU’) contract with Zodiac Interconnect Americas (‘Zodiac’) for an amount of over $6.0 million. As per the deal, Kaman Aerosystems will manufacture and assemble parts for P-8 and Boeing 737NG, 737 MAX aircrafts. We expect such deals would help the company improve its revenues and margins in the quarters ahead.
Kaman also attempts to enhance its shareholders’ value with attractive capital deployment strategies. After hiking dividend by 12.5% in Feb 2015, the company authorized a new $100-million share repurchase program, concurrent with the announcement of its first-quarter results. The new repurchase program would replace the prior one that was approved in Nov 2000. Furthermore, at the end of the first three months of 2015, the company paid dividends worth $4.3 million, up 1% over the prior-year period.
For whole-year 2015, Kaman expects its Distribution Segment to generate sales within $1,250–$1,280 million, while operating margin is predicted within 4.9–5.2%. However, on account of strengthening U.S. dollar, sales outlook of the company’s Aerospace Division is lowered to $625–$645 million. While the company aims to generate free cash flow in the range of $75–$90 million for 2015 backed by strategic cost-saving plans; corporate expenses are estimated within $53–$54 million due to acquisition-related costs.
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