Esterline shares fall on earnings warning
Bellevue-based Esterline shares fell sharply on news of lower earnings guidance and a $52 million write-off.
Seattle Times aerospace reporter
Shares of Bellevue-based Esterline, a conglomerate that supplies avionics, sensors and advanced materials to aerospace and defense systems manufacturers, fell sharply Tuesday after the company late Monday cut its earnings guidance for the year by more than a third and announced a $52 million charge related to a U.K. defense unit.
Shares dropped more than 10 percent when markets opened, and closed regular trading down $3.57, or 6.2 percent, at $54.09.
Esterline said its preliminary financial results for its third fiscal quarter ended July 27 will include an estimated impairment charge against goodwill of $52 million, or $1.67 per share, for its Racal Acoustics subsidiary, a U.K.-based military headset business acquired in 2008.
Esterline CEO Brad Lawrence in a statement said the charge is "fundamentally due to the uncertainty surrounding military budgets, particularly in the U.S." He cited specifically the cancellation of Humvee retrofits.
That charge reduced expected earnings per share for the year by $1.67 per share. However, even excluding the charge, the guidance lowered Esterline's expected full year earnings by 4.6 percent.
Including the charge, the previous earnings guidance of between $5.10 and $5.25 per share was cut by 37 percent to between $3.20 and $3.33 per share.
Lawrence said that while the company's commercial aerospace business "remains strong," the defense side of the business "continues to experience pressure, though much of this is related to timing."
He cited particular concerns about lower production rates of the T-6B pilot trainer aircraft at Hawker Beechcraft and F-35 jet fighter production at Lockheed Martin, as well as a slowdown in Airbus A380 production on the commercial side.
Esterline will release its quarterly earnings Aug. 30.
The company did not provide earnings guidance for fiscal 2013, but Lawrence said that "the way things are lining up, I expect robust growth in the next fiscal year."
Esterline has more than 9,000 employees worldwide. Its subsidiaries include Korry Electronics, which makes cockpit controls, switches and displays, and employs about 650 people in Everett; and Hytek Finishes, a metal-finishing shop that employs about 175 in Kent.
Earlier this year, Esterline's shares rose due to speculation that it would be bought by a large defense player. That speculation intensified in May when Relational Investors, the company's third-biggest stockholder, urged management to improve profitability and appeared to be pushing for a sale.
Dominic Gates: 206-464-2963 or firstname.lastname@example.org