Hi Jaime....
You do have a way of asking questions that might easily embarrass fools that feel compelled to answer, do you not? <G>
Well, rather than answer you straight out...because I might have to eat these words assuming some things I am expecting don't happen...let me try this way...
1) I think first quarter earnings will be a couple of cents and be penalized by a very small loss in 16G even considering close to $1 million in first quarter certification expenses.
2) I think the second quarter will show VERY modest improvement in 16G, with the exception that I would expect certification costs to approximate $250,000. There should be seasonal improvement in ITS and Government Products, and I think it likely that earnings will be a tick or two under a dime a share.
Some time in the next few months, I think it probable that there will be another announcement on the ITS family of products, raising the number of expected platforms from 8 to something higher.
IF I am right on all these assumptions, your goal MIGHT be reached in the third quarter. Anything earlier would be an accident in my view, particularly since confidence has been so broken, there is no currently adequate substitute for Sean Nolen to interface with the "Street", and the company is now a "Prove It to Me" stock.
We will see in due course. Frankly, I think the company isn't well understood, particularly the 16G division. That entity has been sloppily run to be sure, and it is unforgivable that it has taken this long to get it to "breakeven". It doesn't suffer from an insufficiency of demand...it suffers from inefficient management.
Having said that, it already has a great investment in certification, and it is operating in an oligopoly pricing environment (with supply likely to considerably tighten before yearend due to FAA retrofit requirements), with absolutely no ease of entry. Considering there will undoubtedly be price increases prior to yearend, I think current analysis of its value is Spartan.
BTW, there is no doubt in my mind that this division would be operating far better in a company that has top flight manufacturing experience, and I can see no reason whatsoever that under that scenario it wouldn't be capable of producing better than 10% pretax margins on the business.
All in all, for a solid manufacturer...or from someone who absolutely requires seat production capacity for internal use...the division would be a *STEAL* at slightly over one times sales. Given the likelihood that it will produce approximately $45 million in seats this year, sale at that price would totally eliminate long term debt, clean up the balance sheet, and clarify valuations on the ITS operation.
All in all, after watching for months and months with a sick feeling in my stomach, I think we are on the "comeback trail".
Keep your fingers crossed. |
