Goodrich 1Q earnings up 58%

In the face of deepening trouble for domestic airlines, aerospace manufacturer Goodrich Corp. continues to report strong earnings and has raised its forecast through the end of 2008.

First-quarter net income increased 58 percent to $158 million, or $1.24 per diluted share, on sales of $1.75 billion. In the first quarter of last year, Goodrich reported $100 million in net income, or 78 cents per diluted share, on $1.55 billion in sales.

The Charlotte-based company (NYSE:GR) forecasts sales of $7.2 billion to $7.3 billion this year, up from previous estimates of $7.1 billion to $7.2 billion. Full-year earnings per diluted share are forecast at $4.30 to $4.45 per diluted share, up from Goodrich's previous estimate of $4.15 to $4.30 per diluted share.

Content Continues Below

Paul Gifford, head of investor relations for Goodrich, says U.S. airlines are likely to be a smaller part of Goodrich's business in the near future. Domestic carriers account for about 35 percent of the total fleet of commercial planes in the world, and that percentage will drop.

United Airlines announced Wednesday it would cut its fleet by 9 percent, and analyst David Perry writes in a note that other U.S. carriers can be expected to follow suit. He says this "has to affect" companies that sell replacement parts and service, called the aftermarket.

But Gifford notes the United States accounts for less than half of Goodrich's aftermarket sales. And he says the planes most likely to be retired are older McDonnell Douglas aircraft such as MD-80s, MD-90s and DC-9s. The impact on Goodrich would be minimal, he says, because it has almost no equipment on those planes.

Goodrich says its original-equipment sales to manufacturers are expected to increase 20 percent this year. Most of those planes will go to foreign markets, particularly in Asia and the Middle East, Gifford says.

Goodrich has completed an important round of construction and expansion to serve the aftermarket in those regions. The next round of investment overseas is likely to be for production facilities and sourcing of products in low-cost countries.

In a note Monday, Morningstar Inc. analyst Marissa Thompson said Goodrich dominates the aerospace industry as a supplier for the newest Boeing and Airbus models. That will translate into aftermarket sales in coming years.

Thompson also noted the company has been very successful in improving margins. Its operating margin reached 13 percent in 2007, more than double the 6 percent operating margin the company achieved in 2003.

In the latest quarter, Goodrich reported an operating margin of 17.3 percent.

Thompson also said Goodrich's maintenance, repair and overhaul business continues to thrive and is less susceptible to volatility inherent in the highly cyclical aerospace business.

Goodrich Chief Executive Marshall Larsen says manufacturers are still producing new planes at or near record levels.

"We continue to believe that the aerospace industry, because of its global nature, offers some of the best growth prospects of any industry, even in the face of the current U.S. economic conditions," he says in a prepared statement.

Goodrich is a global supplier of systems and services to the aerospace and defense industries.