Expectations weren't high heading into Precision Castparts' (NYSE:PCP) earnings release yesterday, but a win's a win, so let's give credit where it's due: Precision beat those expectations with a stick.

Earnings for the quarter came in at $1.70 per share, $0.04 ahead of estimates once you allow for special items. But it wasn't all good news for Precision. Quarterly sales dropped 3% relative to last year's third quarter, versus the 4.5% increase that might have been.

"Might have been?"
If not for the strike at Boeing (NYSE:BA). You see, "credit" for Precision's slipping sales actually owes to Boeing's machinist union, which called a strike in the middle of a demand boom for commercial airliners last quarter. By shutting down airliner production at Boeing, the machinists also stalled production at a host of Boeing suppliers -- Spirit Aero (NYSE:SPR), BE Aerospace (NASDAQ:BEAV), Honeywell (NYSE:HON), United Tech (NYSE:UTX), and yes, you guessed it -- at Precision, too. According to management, the strike at Boeing cost PCP a total of $129 million in lost sales.

What will be
And yet, the strike's over, right? Those planes that weren't built last quarter still need building. Presumably, the parts Boeing didn't order from Precision then, it will be ordering now. And with Precision stock trading for an ultralow price-to-earnings ratio of about 8, versus analyst expectations of nearly 16% annual long-term profits growth, I've been thinking that now might be just the time to pick up a few shares.

But comments from Precision's earnings release have me rethinking that position: "The Company had been hiring for substantial aerospace growth into fiscal 2010, whereas future demand appears to be flattening out, particularly in the casting and forging aerospace businesses. ... In the fourth quarter, the headwinds from the Boeing strike are expected to continue."

And "a further erosion in the U.S. automotive market" has management reclassifying the auto parts business as a discontinued operation. And Precision Castparts cited the "strong increase in the value of the dollar relative to our international businesses" as an additional headwind.

As if all that weren't enough, I noticed that while Precision had some success in working down accounts receivable last quarter, its inventories surged 27% year over year. I can't imagine that this did anything good for free cash flow, which has been lagging net income for quite some time now (about six quarters at last count).

Put it all together, and as low as they seemed pre-earnings, expectations still may be too high.