Goodrich Corp. (GR) entered into a contract with Al Raha Group to supply a variety of its GRID-LOCK flight control surfaces for retrofit on the Royal Saudi Air Force’s (RSAF) F-15 fighter jet fleet. GRID-LOCK flight controls reduce life cycle costs of the fighters, as it is lighter and more damage-tolerant than traditional honeycomb flight control structures.
 
The GRID-LOCK components produced by Goodrich are more durable and corrosion-resistant than the traditional honeycomb fight controls, as GRID-LOCK technology joins machined structural components to make strong, lightweight parts out of a few interlocking pieces.
 
Goodrich will provide 10 different GRID-LOCK components, which will be retrofitted in more than 150 F-15 fighters of the RSAF fleet. Goodrich will start to deliver the components in late 2010 and it will continue through mid 2011.
 
Goodrich’s Aerostructures team in Riverside, California will manufacture the GRID-LOCK components. The components will include ailerons, flaps, rudder fairings and wing tips and Goodrich currently provides these same components for the U.S. Air Force’s F-15 jets.
 
During the first-quarter earnings call, Goodrich reaffirmed 2010 sales expectation of $7.1 billion, which reflects a year-over-year growth of 6% and adjusted earnings guidance of $4.15 to $4.40 per share. The guidance assumes defense and space sales for both original equipment and aftermarket product and services to increase by about 15% on a year-over-year basis.
 
Our view
 
Goodrich has secured a few contracts in the near past, most recent being the Icelandair contract. We maintain a Neutral outlook on the company due to its declining fortunes in the commercial aerospace market, more dependence on international sales, high research and development overhead and regulatory risks. 
 
Goodrich, however, has a strong balance sheet and its present debt-to-capital ratio of 40.1% is much better than the industry average of 92.4%. The major competitors of the company are Honeywell International Inc. (HON) and Rockwell Collins Inc. (COL).
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