Morningstar | Continued Progress for Cobham’s Turnaround in First-Half 2018; Shares Fairly Valued
Cobham’s reported first-half 2018 results were in line with our expectations, with the main highlights being an impressive order intake and substantially lower debt levels. Revenue, corrected for divestments, was in line with last year, and operating margin improved 60 basis points. Although challenges regarding Boeing’s KC-46 air-refuelling programme are still ongoing, we believe Cobham has successfully stabilized operations in 2017 and has put the building blocks in place to improve performance in the remainder of 2018 and 2019. We retain our no-moat rating and are updating our estimates to reflect the latest developments, but we do not expect significant changes to our GBX 130 per share fair value estimate.Building block number one for our expected operational improvement is solid order intake. In the first six months of 2018, order intake was 12% higher, driven by strong demand for maritime and airborne electronic warfare and missile guidance systems. Additionally, Cobham’s financials improved significantly in first-half 2018 as gearing decreased (net debt/EBITDA stood at 0.2 times at June 30, 2018, versus 1.2 times at year-end 2017). Instead of using the proceeds from the divestments of AvComm and its wireless test and measurement businesses (GBP 325 million) for bolt-on acquisitions, Cobham strengthened its balance sheet and paid down debt. We support this strategic decision, as aircraft manufacturers prefer to team up with well-funded suppliers to guarantee good service over aeroplanes' entire economic lives, which can exceed 25 years. With the disposal of nonmoaty Wireless Assets, Cobham started a process of streamlining what we view as its overly diversified portfolio. We support this strategy, as a more focused portfolio would help management better address the current wide-ranging strategic, operational, and cultural weaknesses.
Cobham provides technologies and services across its defense, aerospace and space markets. Co. has four sectors: Communications and Connectivity, which provides equipment and solutions to enable connectivity across a range of environments in aerospace, avionics, satellite and radio, wireless and mobile connectivity markets; Mission Systems, which provides safety and survival systems, aerial refueling systems and wing-tip to wing-tip mission systems; Advanced Electronic Solutions, which provides solutions for communication on land, sea, in the air and in space through off-the-shelf and customized products; and Aviation Services, which provides outsourced aviation services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.