The Teal Group, FARNBOROUGH, England: Teal Group's Mid-Year Market Briefs Report, released today during the opening of the 45th Farnborough International Airshow, documents how much the U.S. aerospace and defense industry's overall health continues to improve.
“Clearly it was a good year for the U.S. defense and aerospace industry,” said Teal Director of Corporate Analysis Philip Finnegan, who is also lead analyst for Teal Group's Defense & Aerospace Companies Briefing, the competitive intelligence service that evaluates some 50 key world aerospace and defense companies, many of which are included in this latest Market Briefs Report.
— Revenues are continuing to increase, up 8 percent in 2005. Although the lowest increase in three years, it remains a healthy growth rate. Defense electronics companies such as Rockwell Collins Inc. and Harris Corp. show 18-19 percent growth, almost entirely organic growth.
— Backlog bodes particularly well for future sales. It increased by approximately $43 billion total, a 13 percent increase for the 15 companies included in the report. Yet the backlog increase resulted entirely from Boeing's $51 billion boost in its backlog to $160 million. “That rise in Boeing's backlog from commercial airliner orders promises to maintain growth in U.S. aerospace even if defense spending stalls over the next several years,” said Finnegan.
— Profitability for 15 leading defense and aerospace companies is increasing. Operating income from the group increased by 25 percent to $20.8 billion. Operating income in 2004 was also up by a striking 30 percent to $16.7 billion.
— Operating profit margins for the group have been steadily increasing from 5.8 percent in 2003 to 6.7 percent in 2004. And, in 2005 they reached 7.7 percent. “Thus, in addition to the growth in revenues, companies are achieving significantly higher profit margins.
— Debt Reduction has emerged as another benefit. Thus, with the rise in profitability, aerospace and defense companies have been steadily reducing their debt. After peaking at $52.5 billion for the group in 2003, it fell to $45 billion in 2004. And, in 2005, it further fell to $41.5 billion.
— Debt-to-equity levels have also improved. The fall in debt and rise in shareholder equity from the increased profitability of the group has led to a decline in the debt-to-equity levels. The decline has been fairly rapid from a peak of 76.l percent in 2002 to 43.1 percent in 2005.
— Company-funded research and development is growing although it is holding steady as a percentage of sales. The 15 companies spent $7.5 billion on company-funded research and development in 2005, up 11 percent from the previous year. As a percentage of sales it increased slightly to 2.8 percent in 2005 from 2.7 percent the two previous years.
The complete 2006 Teal Group Annual Market Briefs report, which was prepared by Philip Finnegan and Natalie Heer, contains 12 separate, financial-trend documents each with separate bar charts and tables covering the 15 leading world aerospace and defense companies in each category: Revenues; Operating Income; Operating Margin; Net Income; Long-Term Debt; Shareholder's Equity; Debt-to-Equity Ratio; U.S. Government Sales; Reliance on U.S. Government Sales; Company-funded Research and Development; Company-funded R&D as a Percentage of Total Revenues; and Backlog.
This latest Teal Group Annual Market Briefs report has just been provided to Teal Group clients in the latest monthly supplement to Defense & Aerospace Companies Briefing and publicly released for the first time at Farnborough 2006.
The Teal Group is an aerospace and defense market analysis firm based in Fairfax, Virginia USA. It provides competitive intelligence to industry and government worldwide.
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