Why Precision Castparts Earnings Should Fly Higher

Precision Castparts (NYSE: PCP  ) will release its quarterly report on Thursday, and judging from the movement of its stock, investors are expecting good results. With activity in the aerospace industry helping the aircraft components maker's business, Precision Castparts earnings look poised to produce strong growth both this quarter and well into the future.

Precision Castparts actually has a much wider scope than aerospace, serving the auto, medical, and chemical industries as well with a variety of cast and forged metal component offerings. Yet with general weakness in the global economy in many industrial businesses, Precision is undoubtedly benefiting from the relative strength in aircraft demand. Let's take an early look at what's been happening with Precision Castparts over the past quarter and what we're likely to see in its quarterly report.

Stats on Precision Castparts

Analyst EPS Estimate

$2.90

Change From Year-Ago EPS

23%

Revenue Estimate

$2.52 billion

Change From Year-Ago Revenue

28%

Earnings Beats in Past Four Quarters

1

Source: Yahoo! Finance.

How will Precision Castparts earnings fare this quarter?
Analysts have gotten more optimistic about Precision Castparts and its earnings prospects in recent months, boosting their June-quarter estimates by a nickel per share and raising full-year fiscal 2014 and 2015 views by about $0.20 per share each. The stock has reflected that enthusiasm, rising almost 30% since mid-April.

Precision started the quarter off on a positive note, with a strong earnings report in May from its previous quarter. Precision's soaring revenue growth on the back of its acquisition of Titanium Metals didn't quite match up to more aggressive expectations from analysts, but earnings growth of 23% beat estimates and helped send the shares up sharply.

Two moves from Precision during the quarter showed the company's commitment toward improving its strategic position within the industry. The biggest was its announced $600 million acquisition of Permaswage late last month, which designs and makes aerospace fluid fittings. With expectations that the buyout will immediately boost earnings once it closes, the move accentuates the huge opportunity that Precision sees in the aerospace industry. But it also sold off its Primus Composites division to Triumph Group (NYSE: TGI  ) , showing Precision's willingness to sell off what it considers to be non-core assets even if it is more typically a buyer than a seller.

The growth opportunity that Precision has from aerospace just keeps getting bigger. As a supplier to Boeing (NYSE: BA  ) , Precision stands to make big gains from Boeing's projections of $4.8 trillion in aircraft sales over the next 20 years. Boeing's recent woes with its 787 Dreamliner have led to some volatility in stocks of major suppliers, as even engine-manufacturer General Electric (NYSE: GE  ) and components-maker United Technologies (NYSE: UTX  ) are potentially vulnerable to measurable setbacks if something happens to derail Boeing's favorable assessment of the industry. Still, without such an unexpected surprise, any pullback for supplier stocks could be a buying opportunity.

In the Precision Castparts earnings report, watch for the company to discuss the potential impact of the Permaswage acquisition further. With its ongoing efforts to increase its footprint in aerospace, Precision has plenty of chances to send its stock flying much higher in the years to come.

With U.S. stock markets reaching new highs, investors and pundits alike are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery", outlines three companies that could take off when the global economy gains steam. Click here to read the full report!

Click here to add Precision Castparts to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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