Defense Markets Summary
March 2007
Benefiting from the Market Surge for Heavy Protected
Armored vehicles Force
Protection (NASDAQ:FRPT) released its 2006 annual report
Friday March 16, 2007 reporting revenues of US$196 million.
Third of these revenues were received in the fourth quarter,
which also contributed 93% of the annual net income.
Elbit Systems
(NASDAQ: ESLT) is reporting today its 2006 results, reporting
42% increase in revenue to $1.52 billion, doubling the profit
to $72.2 million (Earning Per Share (EPS): $1.72). By December
31, 2006 its backlog soared to $3.79 billion, a slight increase
from $3.35 billion reported in 2005. "Our results were
achieved despite the negative impact from Elisra's financial
performance, and we intend to continue the Elisra turn-around
in 2007, making it a contributor to our financial results, while
maintaining our growth and profitability patterns“ said
President and CEO of Elbit Systems, Joseph Ackerman.
more...
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| Last
week, European defense companies led last week's earning reports,
beginning with an excellent report for 2006, presented by the
Swedish Saab Group, followed
by a positive report by Thales
Group, ending the week with EADS
presenting its a mixed view of growing defense sales amidst
troubled commercial group Airbus in 2006. When examining all
three companies from the defense perspective, all indicators
were positive and all three reported strong gains in sales and
profitability. Two niche players also reported last week: Tadiran
Communications which improved its profitability despite
reducing revenues, and AeroVironment
which delivered upon an expected surge in sales in the third
quarter.
The Swedish Saab
group (SAABB.ST) continues to demonstrate strong
performance; for five consecutive years, Saab has increased
sales by an average of 6% per year. Anticipating a decline in
its home market, Saab is planning to expand its life-cycle support
services and penetrate further into niche markets, especially
in Scandinavia, South, Africa and Australia, enhancing its activities
there through business mergers and acquisitions.
Thales
also reported a strong year. The report reflected mixed results
yet demonstrated the company's solid management, which led the
company to gain a 16% increase in net income despite flat growth
in revenues. Following strategic changes in its holdings, Thales
is bullish about 2007, forecasting revenues of about 12 billion
euros, with an operating margin of 7.5%.
As expected, the effect of
the troubled Airbus division affected EADS
results, as reflected from its annual report published last
Friday. These concerns shadowed an excellent year reported by
the company's defense oriented divisions. At group level, the
company's revenue totaled 39.4 billion euros increase of 15%
over to 2005 but net income tumbled dramatically by 95% to 99
million (0.12 euros earning per share EPS). Military sales,
which rose by 30% from 7.7 billion to 10 billion and maintained
high profitability practically saved the day for the group.
Two smaller defense companies also reported their
2006 results last week. Tadiran
Communications (TDCM.TA) from Israel reported annual
revenues of $258.6 million, representing a slight drop of 4.9%,
compared to 2005. Nevertheless, Q4 sales reached $63.3 million,
a substantial increase over the same quarter of 2005. The company's
orders backlog remains almost at the 2005 level, at $346 million,
with slight reduction of export orders offset by increased sales
in Tadiran's domestic market (Israel).
AeroVironment
(Nasdaq:AVAV) expects to meet its target of increased revenue
by 20 to 25% in 2007. For the past three quarters the company
increased its sales to $123 million, representing a 13% growth
over 2005. Most of the gain was due to the increase in orders
for the company's unmanned systems. This growth was anticipated
with the fulfillment of part of the company's backlog, which
reduced disproportionally to 43.2 million, slightly lower than
its January 2006 level and about half of the April 2006 level.
AeroVironment maintained an operating margin of 15% - 16%.
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