Cobham Plc (COB) advanced the most in more than 22 years after raising its dividend 33 percent and saying it has “plenty” of acquisition targets to help it supply parts for the Boeing 787 and the Airbus A350.
“We have about 700 million pounds ($1.1 billion) of acquisition firepower,” Chief Financial Officer Warren Tucker said today in an interview. Small purchases of as much as $50 million dollars have “worked well,” while Cobham is willing to pay a lot more for “substantial companies with more developed customer bases,” he said.
The world’s largest maker of airborne-refueling equipment is in talks with potential candidates and is focused on civil aviation including aircraft communication technology, Tucker said. The manufacturer boosted the full-year dividend to 8 pence from 6 pence and said its order intake gained 16 percent in 2011 on a constant currency basis.
U.S. and European defense spending cuts are prompting aerospace companies to seek savings and expand in growth sectors, such as civil aviation. Wimborne, England-based Cobham supplies parts to both of the world’s largest commercial jet makers, Chicago-based Boeing Co. (BA) and Airbus SAS. The Boeing 787 began flying commercially late last year, and the Airbus A350 is scheduled to enter service in 2014.
“A U.S. military focused upon smaller, lighter and more flexible networked forces will be positive for Cobham,” Sandy Morris, an analyst at Jefferies, said in a note to investors.
Cobham said today that the U.S. government’s defense priorities favor the company. The manufacturer reported full- year revenue of 1.85 billion pounds, compared with the average analyst estimate of 1.83 billion pounds.
Investor sentiment toward Cobham “remains quite negative, but that could change rapidly,” said Morris, who reiterated a “buy” recommendation on the stock. “Cobham will ultimately strike a balance between investing for future growth, bolt-on acquisitions and a return of capital to shareholders.”
CFO Tucker sidestepped a question about whether Cobham has been approached about being acquired.
“When I joined nine years ago I was told we were about to be acquired,” he said. “Here we are, nine years later, still independent and surviving and prospering.”
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