Morningstar | Narrow-Moat Meggitt Is On Target
Meggitt is a global engineering company specializing in high-performance components and subsystems for the aerospace, defence, and energy markets, with highly engineered equipment on over 47,000 aircraft. This significant and expanding installed base provides the firm with an aftermarket revenue stream stretching out for decades. More than 50% of revenue is derived from higher-margin aftermarket services, which we view as evidence of sticky customer relationships, supporting our narrow moat rating.The Meggitt Aircraft Braking Systems, or MABS, business (19% of revenue and close to 40% of group profit) is a market leader in military, business aviation, and regional aircraft, and we like the firm’s strong positions on aircraft such as the Bombardier C Series, numerous helicopters, and the F-35 fighter aircraft. Once an aircraft is delivered, the owner typically uses original equipment manufacturers for maintenance of mission-critical componentry, such as wheels and brakes. Moreover, Meggitt’s positions on helicopters, which use large amounts of dynamic parts, and on regional jets, which land 3 times more often than wide-body commercial transports, enable the company to drive significant aftermarket revenue. Ideally, we would like MABS to gain more exposure to the Boeing and Airbus platforms, as we expect the strong upcycle of narrow-body deliveries to continue.The other major business segment, Sensing Systems, accounts for 25% of revenue and provides reliable, high-performance sensing solutions onboard aircraft. Its 60-year track record and high research and development spending have resulted in engine sensing programme wins on all major next-generation narrow- and wide-body platforms, including Rolls-Royce Trent 900 (A380) and Trent XWB (A350), Pratt & Whitney PurePower 1100 (A320neo), and Safran Leap (A320neo, 737 MAX, Comac C919). In our view, these platform wins will provide equipment revenue for the coming decades, supporting Meggitt’s moat.As Meggitt’s high R&D investment phase ended in 2016, we expect increased profitability and returns, as more new platforms, particularity business jets, with Meggitt’s products enter service over the next five years.Meggitt is the parent company of a group whose principal activities are the design and manufacture of components and sub-systems for aerospace, defense and other markets. Co. has five segments: Meggitt Aircraft Braking Systems, a providers of aircraft wheels, brakes and brake control systems; Meggitt Control Systems, which comprised of aircraft fire protection and control systems; Meggitt Polymers and Composites, which comprised of engine and aerodynamic seals, flexible fuel tanks and fuel systems; Meggitt Sensing Systems, a provider sensing and monitoring systems for aircraft; and Meggitt Equipment Group, which include unique heat transfer equipment for hydrocarbon processing.
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.