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Expedia, Rolls-Royce and Rockwell Collins surge, Genesis Lease loses ground on flat results

31-Jul-2009

Despite forecasts of continued “very difficult” conditions and a slow recovery, Rolls-Royce’s report of a 27% surge in revenue and 85.7% increase in operating profit during 1H2009 was welcome news to investors. Accordingly, its share price surged 8.8% yesterday.

The UK-based engine manufacturer recorded a massive surge in net profit of more than 530%, mostly due to the book value of its significant foreign currency hedges. Underlying profit before tax was up a more modest 8.5%. Civil aerospace engine deliveries were down 8.2%, to 424, but the value of the engine manufacturer’s order book increased by approximately GBP2 billion to GBP57.5 billion, with notably strong ordering for A330 engines.

The company’s CEO, Sir John Rose, stated that Rolls-Royce’s cost cutting and growing order book, combined with its wide business scope and robust balance sheet, have put it in a good position, allowing the company to confirm its full year guidance and increase its interim dividend to shareholders. Nonetheless, Rolls-Royce remains “understandably cautious” given the outlook for the global economy.

Avionics manufacturer, Rockwell Collins, meanwhile did not enjoy as strong a performance as Rolls Royce (reporting a 9.2% decrease in revenue and a 13.7% fall in 3Q2008/2009 operating profit yesterday), but investor confidence in the company sent its stocks up 5.6%. Revenue of USD1.084 billion in the quarter was below market expectations, but the earnings result was slightly better than expected.

Despite weakness in its commercial systems business (which reported a 46% drop in operating profit), the US-based company has maintained its full year forecast, slightly boosting its revenue outlook due to acquisitions. Rockwell Collins has also expressed confidence in an early recovery in the business market. However, it remains concerned that major aircraft manufacturers could further revise their production plans downwards, affecting revenue in 2010.

Also higher in investors' regard was online travel company Expedia. The company’s share price rose 11.7% yesterday, after it reported a 2Q2009 net profit of USD40.9 million, much better than market expectations. The company cautioned that travel and hotel bookings still remain depressed, and there is still uncertainty in the trading environment, but it was “well on the way” to a recovery, with the pace of decline in bookings slowing.

Leading the falls, Genesis Lease's share price dropped 6.3% yesterday. The leasing company reported revenue dropped 2.4%, while and EBITDA climbed marginally, up 1.3%, in 2Q2009. 51 of the company’s 54 aircraft are in operation at the end of the quarter, with two since delivered and one more expected to be delivered in 3Q2009. Genesis recently acquired an A321, contracted on lease to US Airways. Genesis has no more lease expirations this year and only three scheduled aircraft lease expirations in 2010, all of which are due in the fourth quarter. 

Selected Aviation suppliers’ daily share price movements (% change): 30-Jul-09


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