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GuruFocus Financial Strength Rank measures how strong a company’s financial situation is. It is based on these factors

1. The debt burden that the company has as measured by its Interest coverage (current year).
2. Debt to revenue ratio. The lower, the better
3. Altman Z-score.

A company ranks high with financial strength is likely to withstand any business slowdowns and recessions.

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GuruFocus Profitability Rank ranks how profitable a company is and how likely the company’s business will stay that way. It is based on these factors:

1. Operating Margin
2. Trend of the Operating Margin (5-year average). The company with an uptrend profit margin has a higher rank.
••3. Consistency of the profitability
4. Piotroski F-Score
5. Predictability Rank•

The maximum rank is 10. A rank of 7 or higher means a higher profitability and may stay that way. A rank of 3 or lower indicates that the company has had trouble to make a profit.

Profitability Rank is not directly related to the Financial Strength Rank. But if a company is consistently profitable, its financial strength will be stronger.

Profitability & Growth

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Business Description

Industry: Industrial Products » Metal Fabrication  
Compare:OTCPK:NPSKY, NYSE:VMI, NYSE:ATI, NYSE:CRS, NYSE:MLI, NYSE:NCS, NAS:GTLS, NYSE:BRSS, NAS:HAYN, NYSE:RYI, NAS:SHLO, NYSE:GHM, NAS:BOOM, NAS:ARCW, AMEX:SIF, OTCPK:TPCS, OTCPK:OLNCF, NAS:HIHO, OTCPK:IAALF, OTCPK:CASL » details
Traded in other countries:PC9.Germany,
Headquarter Location:USA


Precision Castparts Corp was incorporated in the State of Oregon. The Company is a manufacturer of complex metal components and products provides high-quality investment castings, forgings and fasteners/fastener systems for critical aerospace and power applications. It also provides investment castings and forgings for general industrial, armament, medical and other applications; nickel alloys and mill forms, as well as cobalt alloys, for the aerospace, chemical processing, oil and gas, pollution control and other industries; seamless pipe for coal-fired, industrial gas turbine, and nuclear power plants, as well as oil and gas applications; fasteners for automotive and general industrial markets; specialty alloys for the investment casting industry; refiner plates, screen cylinders and other products for the pulp and paper industry; metal-injection-molded and ThixoFormedparts for automotive and other markets; grinder pumps and affiliated components for low pressure sewer systems; critical auxiliary equipment and gas monitoring systems for the power generation industry; and metalworking tools for the fastener market and other applications. It manufactures complex metal components and products in three main business segments: Investment Cast Products, Forged Products and Fastener Products. The Company's Investment Cast Products segment manufactures investment castings for aircraft engines, IGT engines, airframes, medical prostheses, armament, unmanned aerial vehicles and other industrial applications. The segment also provides alloys to PCC's investment casting operations, as well as to other investment casting companies. It manufactures forged components for the aerospace and power generation markets. Forged Products' aerospace and IGT sales are mainly derived from the same large engine customers served by the Investment Cast Products segment, with additional aerospace sales to manufacturers of landing gear and airframes. Therefore, the dynamics of the aerospace and IGT markets, as described in the Investment Cast Products section above, are virtually the same for Forged Products. It manufactures forged components for the aerospace and power generation markets. Forged Products' aerospace and IGT sales are mainly derived from the same large engine customers served by the Investment Cast Products segment, with additional aerospace sales to manufacturers of landing gear and airframes. Therefore, the dynamics of the aerospace and IGT markets, as described in the Investment Cast Products section above, are virtually the same for Forged Products. The Company's main competitors are Ladish Co., a subsidiary of Allegheny Technologies, Inc., Fortech, S.A. and Thyssen AG for aerospace turbine products, Alcoa Inc. and Firth Rixson Limited for aerospace structural products, Vallourec & Mannesmann Tubes and Sumitomo Corporation for energy products and Allegheny Technologies, Inc., Carpenter Technology Corporation, Haynes International, Inc., an

Guru Investment Theses on Precision Castparts Corp

Mario Gabelli Comments on Precision Castparts Corp - Jan 29, 2016

Precision Castparts Corp. (1.9%) (PCP – $232.01 – NYSE) (NYSE:PCP), based in Portland, Oregon, manufactures complex metal components and products for the aerospace, power, and general industrial markets. On August 10, 2015, the company announced that it would be purchased by Berkshire Hathaway for $235 cash per share in a merger worth $32.3 billion. The transaction is expected to close in the first quarter of 2016, after receiving shareholder and regulatory approvals.


From Mario Gabelli (Trades, Portfolio)'s ABC Fund Merger and Arbitrage shareholder letter for the fourth quarter 2015.

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Wallace Weitz Comments on Precision Castparts Corp - Oct 27, 2015

Precision Castparts Corp (NYSE:PCP) is a manufacturer of complex metal components and products that provides investment castings, forgings and fasteners/ fastener systems for critical aerospace and power applications. On August 10th, Berkshire Hathaway announced an agreement to purchase Precision Castparts (NYSE:PCP) for $235/share, or roughly $37.2 billion including debt (Berkshire’s largest ever acquisition). While the transaction provides a boost to the Fund’s near-term performance, Berkshire is buying Precision at a modest discount to our base estimate of intrinsic value. Losing a long-term compounder early on in our investment horizon is disappointing, but the silver lining in this transaction is that we will continue to own PCP indirectly through our position in Berkshire.



From Wallace Weitz (Trades, Portfolio)'s 3Q 2015 commentary.

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Sequoia Fund Comments on Precision Castparts - Aug 27, 2015

Question:



Could you update us on Precision Castparts (NYSE:PCP)? I know that the stock underperformed in 2014. I know it was kind of slowing down. And in 2015, it preannounced a couple quarters back to back. I was wondering if you could update us on that and if you still see compelling value there.



Greg Steinmetz:



We do see compelling value, but it has been a disappointment. It was supposed to earn $16 a share in the fiscal year that we just started. Instead, management is guiding to something like $13. The difficulty has been confined largely to the forged product segment, which is a very high fixed cost business. So when volume goes against you, you really feel it in the margin. We saw a 900 basis point drop in the margin of that segment last quarter. Furthermore, the oil & gas market has gone against Precision. Management had big plans for the oil & gas business, making very large diameter pipes that are highly resistant to corrosion. Precision is the only company on earth that can make that kind of pipe. Management thought that whatever happens with the oil & gas market, the company would be ready, and it would still be able to sell this pipe because of its compelling value. That did not happen, and the company was late to restructure that business and cut costs. The restructuring is now completed; so things should get a little better. Management was expecting $400 million in revenue out of that pipe business last year and only got $200 million, and it will probably be similar this year.



Another thing that has hurt is that Rolls-Royce is aggressively trying to take inventory out of its system. Rolls had too much inventory because managers were worried about not being able to meet delivery schedules and overdid it on inventory. Now they are cutting back the other way. There have been some other issues. Precision makes a lot of parts for the military. Military spares are down 35%. That was not something that the company foresaw happening in the current fiscal year.



That $16 a share was a number that was derived three years ago and as recently as six months ago management was still talking about $16 a share for this year. But lately management recognized that the world had changed and decided to throw in the towel. In addition to the restructuring I mentioned, the company also wrote down some inventory. This year, Precision thinks it is going to make about $13. I think that is a conservative number. Time will tell.



What we like about Precision and why we are keeping it is, as I mentioned, that it is the only company in the world that can make these large diameter highly corrosive resistant pipes. Precision is also far and away the leader in making powdered metal components that are used in large jet engines. It is the only company that can make certain large structural castings, and there are some other things that only Precision can supply. That gives the company a lot of leverage over its customers. Management is not afraid to use it. So it has a very strong competitive position. We also have what should be a growing market for aerospace.



I was with Boeing (BA) management this week — the company is talking about raising the monthly unit deliveries of the narrow body 737 from 42 a month now to 47, and then to 50-something. That could even go to 60 because the backlog is so big, and there is still an enormous appetite even in China — which, as you know, has a soft economy — to get these planes and get them now. The 787 has gone from 10 a month to 12 and that is going to go to maybe 14. So there is growth there. Precision is seeing that in some of its segments. The company will not see it in other areas because of de-stocking at Rolls-Royce. And the build rate for the 747 is being dialed back. Also there is a transition going on from the old models of the 737 and the Airbus narrow body, the A320, from the current generation to a re-engined version. Precision has had to absorb a lot of development costs along the way as that transition has taken place. But now it is coming to an end.



One thing that I think worries people is that, okay, aerospace is going to be a growing market, but is Precision losing share? We all know that because of Precision’s arrogance in the way it treats its customers — raising prices and making demands on them — they would like to cut Precision down to size. So is there a case of customers taking market share away from Precision and giving it to Alcoa and others? I have looked under as many rocks as I can think of to try to get to the bottom of this and I am not finding the evidence. Maybe I am looking under the wrong rocks, but the fact that I have not turned anything up and the fact that the customers buy under long term contracts which they are locked into, and the fact that competitors are not giving me any examples of how they have taken share from Precision make me think we are okay on the market share question.



If Precision can preserve market share in a growing market, we should be okay, which is why we are still holding the stock. Plus at its current price it is not expensive. It trades at a discount to some other of the big names in aerospace. Before it always traded at a premium.



From Ruane, Cunniff & Goldfarb Investor Day 2015 Transcript Part I.



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Ratios

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Dividend & Buy Back

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Dividend Yield % 0.05
PCP's Dividend Yield % is ranked lower than
100% of the 1811 Companies
in the Global Metal Fabrication industry.

( Industry Median: 1.66 vs. PCP: 0.05 )
Ranked among companies with meaningful Dividend Yield % only.
PCP' s Dividend Yield % Range Over the Past 10 Years
Min: 0  Med: 0 Max: 0.05
Current: 0.05
0
0.05
Dividend Payout Ratio 0.01
PCP's Dividend Payout Ratio is ranked higher than
100% of the 1144 Companies
in the Global Metal Fabrication industry.

( Industry Median: 0.34 vs. PCP: 0.01 )
Ranked among companies with meaningful Dividend Payout Ratio only.
PCP' s Dividend Payout Ratio Range Over the Past 10 Years
Min: 0  Med: 0 Max: 0.01
Current: 0.01
0
0.01
Forward Dividend Yield % 0.05
PCP's Forward Dividend Yield % is ranked lower than
100% of the 1711 Companies
in the Global Metal Fabrication industry.

( Industry Median: 1.82 vs. PCP: 0.05 )
Ranked among companies with meaningful Forward Dividend Yield % only.
N/A
5-Year Yield-on-Cost % 0.05
PCP's 5-Year Yield-on-Cost % is ranked lower than
99% of the 2240 Companies
in the Global Metal Fabrication industry.

( Industry Median: 2.08 vs. PCP: 0.05 )
Ranked among companies with meaningful 5-Year Yield-on-Cost % only.
PCP' s 5-Year Yield-on-Cost % Range Over the Past 10 Years
Min: 0  Med: 0 Max: 0
Current: 0.05

Valuation & Return

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More Statistics

Revenue (TTM) (Mil) $9,662.00
EPS (TTM) $ 9.47
Short Percentage of Float1.91%
52-Week Range $187.00 - 234.99
Shares Outstanding (Mil)137.59

Analyst Estimate

Mar16 Mar17 Mar18 Mar19
Revenue (Mil $) 9,986 10,497 11,134 11,216
EPS ($) 12.43 13.74 15.21 15.61
EPS without NRI ($) 12.43 13.74 15.21 15.61
EPS Growth Rate
(Future 3Y To 5Y Estimate)
7.22%
Dividends per Share ($) 0.15 0.15 0.16

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