Be Aerospace Inc. has a market cap of $3.09 billion; its shares were traded at around $30.23 with a P/E ratio of 20.7 and P/S ratio of 1.6. BEAV is in the portfolios of Arnold Schneider of Schneider Capital Management, John Buckingham of Al Frank Asset Management, Inc., RS Investment Management, Pioneer Investments, George Soros of Soros Fund Management LLC, Jeremy Grantham of GMO LLC.
Highlight of Business Operations:New product development is a strategic initiative for us. Our customers regularly request that we engage in new product development and enhancement activities. We believe these activities protect and enhance our leadership position. We believe our investments in research and development over the past several years have been a driving force behind our ongoing market share gains. Research, development and engineering spending was approximately 6% of sales during 2010 and is expected to remain at approximately 5%-6% of sales for the next several years.
The current global macroeconomic environment is mixed and in spite of headwinds from the Icelandic volcano eruption in April and the ongoing European debt crisis, the important global airline metrics continue to improve. For the first six months of 2010, international traffic has improved 7.9% compared to the first half of 2009. Asia and the Middle East have experienced significant traffic growth of 10.5% and 20.1%, respectively, and U.S. and European international passenger traffic is up 5.9% and 3.3%, respectively, year-to-date. In addition, premium passenger demand has continued to improve. Through May, premium international traffic is up 10.5%. IATA now expects 2010 international passenger traffic growth of 7.1% and cargo traffic growth of 18.5% and for airlines to post aggregate global profits of $2.5 billion, a $5.3 billion improvement compared with IATA s March forecast calling for a $2.8 billion loss.
Revenues in the second quarter of 2010 of $483.9 increased by $9.1 or 1.9%, as compared with the second quarter of the prior year. The increase in revenues was the result of the $12.5 or 5.6%, increase in revenues at the commercial aircraft segment as a result of higher level of spares revenues offset by a $3.5 or 1.8%, decrease in revenues at the consumables management segment.
Second quarter 2010 operating earnings of $78.8 increased 6.6% on the aforementioned 1.9% increase in revenues. Operating margin in the current quarterly period was 16.3% and expanded by 70 basis points as compared with the prior year period as a result of the factors discussed above.
Earnings before income taxes for the three months ended June 30, 2010 of $56.4 increased by $5.0 or 9.7%, as compared with earnings before income taxes in the prior year period due to a 1.9% increase in revenues, a 70 basis point expansion in operating margin, and an 11.6% reduction in interest expense, offset by a $2.5 non-cash debt prepayment charge.
Second quarter 2010 consumables management segment (CMS) revenues of $193.1 were essentially unchanged as compared with the prior year. Second quarter 2010 CMS operating earnings of $38.2 increased 6.7% and operating margin of 19.8% expanded 160 basis points as compared with the second quarter of 2009. The 160 basis point improvement in operating margins at CMS was driven by ongoing operational efficiencies (approximately 75%) and an improved product mix (approximately 25%).
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