B/E raises forecast after achieving strong 2Q earnings growth

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Significant margin expansion in B/E Aerospace's commercial aircraft and consumables management segments drove a $2.6 million year-over-year increase in net income to $37.3 million, surpassing the firm's own expectations for the three-month period and leading it to raise its forecast for 2010.

Revenues for the quarter ended 30 June rose 1.9% to $483.9 million for the company, which is a specialist in aircraft interiors and provides fasteners and consumables to the aerospace industry.

"Our consumables management segment operating margin expanded by 160 basis points while our commercial aircraft segment operating margin expanded by 140 basis points," B/E chairman and CEO Amin Khoury noted during an earnings conference call last week.

He also points out that bookings in the first half of 2010 "increased more than 10% sequentially as compared with the second half of 2009".

Looking ahead, B/E expects continued expansion in orders and backlogs and a continued recovery in its commercial aircraft and spares and consumables businesses.

The company has raised its 2010 guidance by $0.05 per share to approximately $1.50 per share exclusive of a $0.02 per share debt repayment charge. It expects "a significant increase in revenues, earnings and cash flows, beginning in 2011", says Khoury.

The Farnborough air show last month proved a boon for B/E. Company president and chief operating officer Mike Baughan says that since many of the aircraft orders at Farnborough were for narrowbodies, B/E feels greater confidence that narrwobody rates "are going to hold". Widebody rates, meanwhile, are already enjoying a significant uptick, which benefits B/E.

B/E also continues to benefit from the Koito Industries debacle, with the firm picking up business previously awarded to Koito. Earlier this year, Koito admitted to falsifying aircraft seat test data on as many as 150,000 seats in the world fleet.