From an investor's perspective, most corporate "realignments" are pretty much non-events. The department of Widget Manufacture gets merged into the bureau of Wingding Maintenance -- or the W&W Inc. business is split in twain -- and life goes on. That's not the case, though, with Aerojet Rocketdyne's (NYSE:AJRD) latest realignment.
This is really good news.
Aerojet Rocketdyne stock today
In what it is calling a "significant reorganization," Aerojet Rocketdyne announced this week that it is "consolidating the company's six business units into two -- space and defense." That statement sounds clear enough, but is actually a bit misleading.
Currently, you see, Aerojet Rocketdyne reports its numbers according to two main divisions in its business: aerospace and defense, and real estate. Problem is, the first division accounts for more than 97% of Aerojet's business, while the latter is worth just 3%. Essentially, management has been telling investors: "This one stack of pennies is what we made from real estate last year, and over here in this other mountain of cash is where we keep everything else. You sort it out."
Which isn't particularly helpful to investors looking at Aerojet Rocketdyne stock.
Aerojet Rocketdyne stock tomorrow
That all changes now. Henceforth, Aerojet will be taking its three defense businesses and merging them into a consolidated defense unit. Those three businesses are:
- Tactical systems -- engines and warheads for military missiles.
- Missile defense and strategic systems -- engines for anti-missile missiles, and for nukes as well.
- Defense advanced programs -- supersonic and hypersonic engines for missiles and aircraft.
Simultaneously, it will group its three space-related businesses into a space unit:
- Space launch systems --which helps to power ULA's Delta IV and Atlas V launch vehicles.
- Space advanced programs -- including the propulsion system for Boeing's CST-100 Starliner space capsule.
- Space systems -- satellite maneuver engines.
What it means to you
Aerojet management says the new, bifurcated organization is a "crucial step in our strategic journey to enhance the efficiency of Aerojet Rocketdyne and improve the company's competitive posture" and will increase "accountability at the management level," reduce "spans and layers in the organization," and produce "significant cost savings for our customers and the country."
That all remains to be seen. What the reorganization will definitely do, though, is make Aerojet Rocketdyne stock a bit more transparent to investors. Going forward, we'll know more precisely how much revenue the company is getting from defense work, how much from space -- and how these two businesses are performing relative to each other and to Aerojet's competitors.
With Aerojet Rocketdyne stock down 15% over the past year in a mostly flat market, it's about darn time we got some better data on these things. Kudos to management for (finally) giving it to us.