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Kaman Corporation Assessment

Strategy: Kaman's management continues to make small acquisitions as one of the tools in management's efforts to broaden the company beyond its traditional helicopter manufacturing operations. With recent acquisitions of a businesses ranging from composites to fusing, Kaman is signaling its intention to build up the company's aerospace business by focusing increasingly on subcontracting. It has looked at potential acquisitions in helicopter maintenance and general aviation aerostructures among other areas.

Strengths: Diversification into new areas such as composites and fusing has enabled the company to overcome the decline in its helicopter business. The company's aerospace business has high profit margins, accounting for nearly two-thirds of the company's operating profit over the past several years.

Weaknesses: The helicopter business has become increasingly sidelined and has experienced

Write-offs connected with the completion of the Australian SH-2G helicopter program. Production of new helicopters has ended because of a dearth of orders for the SH-2G and the KMAX helicopters.

The industrial distribution business that makes up the majority of Kaman's business has considerably lower profit margins than its aerospace business.

Opportunities: Management has been doing an excellent job of improving the company's profitability with further improvements expected. The boom in commercial aircraft production provides opportunities for Kaman's high margin specialty bearing and aerostructure businesses to benefit from higher production rates at Boeing and Airbus. Kaman's past experience as a prime contractor makes it an attractive outsourcing proposition for helicopter and fixed wing manufacturers. The unmanned version of the K-MAX appears to have decent prospects following its successful deployment in Afghanistan.

Threats: A commercial aerospace downturn would put pressure on the company's commercial aerospace business. Like other defense contractors, Kaman will face pressure from lower defense spending.

 

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