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Earnings Report Breakdown: State of the Avionics Industry

By Juliet Van Wagenen | August 10, 2016
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[Avionics Today 08-10-2016] Avionics sales are up, test systems orders are down: at least that’s what companies appear to be saying in earnings reports across the industry. As avionics and aerospace companies release second and third quarter 2016 earnings reports, we’ve dissected the half-year industry highlights.

Rockwell Collins Pro Line Fusion Upgrade for CJ3
Rockwell Collins Pro Line Fusion Upgrade for CJ3. Photo: Rockwell Collins

Esterline Sees Avionics Sales Spike

Aerospace manufacturer Esterline struck a major contract with Ukrainian cargo airline, Antonov Airlines, to supply forward-fit and retrofit fully integrated avionics cockpits over the next four to five years. The agreement may have contributed to the 6.7 percent spike in revenue for the third quarter of the company’s fiscal year 2016. Esterline grew consolidated revenue to $517.1 million, compared to $484.7 million for the third quarter of 2015, driven by strength in various end markets for the company’s avionics and controls business segment.

Avionics sales accounted for most of the increase in 2016 orders. Backlog at the end of the third quarter of 2016 was $1.4 billion, compared with $1.2 billion at the end of the third fiscal quarter of 2015, according to a statement released by the company. New orders were $552.1 million, compared with $467.4 million in 2015.

“We are pleased to report a strong third quarter, delivering on commitments to our stakeholders despite market fluctuations. Our teams are executing well and making good progress against our objectives for growth, backlog, and profitability, while also continuing to drive a range of operational improvement initiatives,” said Esterline’s Chief Executive Officer Curtis Reusser.

Aviation Sales Level Rockwell Collins Earnings

Rockwell Collins also saw an upswing in avionics sales during its third quarter 2016, due to higher fixed-wing platform revenues and higher simulation and training sales. The uptick was partially offset by lower deliveries on various rotary wing platforms, however. Communication and navigation sales also decreased due to the wind-down of an international electronic warfare program and lower international deliveries of targeting systems. Overall, total sales in the third quarter of fiscal year 2016 were $1.33 billion, a 3 percent increase from the same period in 2015.

“Lower-than-anticipated business aircraft [Original Equipment Manufacturer] OEM production rates and air transport aftermarket service and support sales have impacted our commercial systems revenue outlook,” said Rockwell Collins Chairman, President and Chief Executive Officer, Kelly Ortberg. “We now expect commercial systems sales to be down about 1 percent for the year. In addition, we now forecast our cash flow from operations at the lower end of the previously guided range due to the timing of receivable collections and higher spending for pre-production engineering costs.”

Original equipment sales decreased during the quarter due to lower business aircraft OEM production rates, lower product deliveries to a Chinese regional aircraft manufacturer, and lower Airbus A330 production rates, according to a statement released by the company. These dips were mostly offset by higher product deliveries in support of the Airbus A350 and Boeing 787 production ramp ups, favorable customer timing for airline selectable equipment, higher product deliveries for the Bombardier CSeries program, and higher customer-funded development program revenues, however.

The company’s Information Management Services (IMS) segment, which provides communication services to the aviation industry, also increased due to 9 percent growth in aviation-related sales, including Globalink and ArincDirect. In addition, non-aviation related sales increased 11 percent due primarily to higher airport program sales.

Astronics Sees Test Systems Slump

Aerospace systems and test equipment manufacturer Astronics reported a slump in sales for the quarter, fueled by a drop in test systems segment sales, which were down 46.5 percent to $21.9 million. Sales across the company were down $8.7 million from the same period last year despite record aerospace segment sales of $142.5 million, which were up 7.8 percent, or $10.3 million.

“Our test business is operating with lower volume this year as demand from the semiconductor industry dropped. At the same time, we are involved in a significant number of development programs, which hold great promise for the future,” said Peter Gundermann, president and CEO of Astronics, noting that the company has “very positive” expectations for test systems in 2017.

In contrast, aerospace orders in the second quarter of 2016 were its best ever for the company, at $163.5 million, an increase of 21.6 percent over orders of $134.5 million in the 2015 second quarter. Continued orders from OEMs such as Panasonic and Boeing contributed heavily to the uptick in aerospace revenues, as well as several announcements including a contract with the U.S. government to provide night-vision-compatible lighting systems for an undisclosed country’s fleet of F-16 aircraft, Gundermann noted during the company’s Aug. 3 second quarter conference.

Teledyne Looks to Partnerships to Buoy Flat Sales

Teledyne’s aerospace and defense electronics segment’s second quarter 2016 sales were up 7.2 percent to $153.2 million, compared with $142.9 million during the same period in 2015. The second-quarter sales reflected higher avionics products sales of $4.3 million, the company reported. This wasn’t enough to offset losses in other segments for the company, however, which saw a 6.7 percent decrease overall.

Going forward, the company looks toward several acquisitions and partnerships made during the quarter to buoy sales going forward, including a relationship with Lufthansa Systems to integrate Lufthansa’s Lido/eRouteManual navigation application with Teledyne’s GroundLink Comm+ system with Aircraft Interface Device (AID) functionality to bring further information more usefully into the cockpit.

UTC Aerospace Systems Sees Sales Jump Despite Ramp-Up

Halfway through 2016, UTC reported its sales numbers were sitting at $14.9 billion, a sales increase of one percent versus this point in 2015. UTC Aerospace Systems in particular saw a larger spike of 5 percent for commercial aftermarket sales.

“United Technologies had a solid first half of the year with 2 percent organic sales growth, and we remain on track to meet our growth targets for 2020,” UTC President and Chief Executive Officer Gregory Hayes said. “We delivered strong cash flow, led by exceptional cash generation in the commercial businesses, even while we continued to invest in the aerospace ramp.”

As a result of the company’s solid financial performance through the second quarter, Hayes noted they would be increasing the 2016 sales forecast of $57 to $58 billion. For the rest of the year, the company is looking to focus on key priorities, including: achieving critical aerospace program milestones and successfully meeting the production ramp to support the growing order book. The UTC aerospace systems also hopes to cash in on its new Pulse Health Monitoring System (HMS), a vehicle health management system designed to enable real-time evaluation of an aircraft’s condition, released

last month


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