John Godyn

John Godyn asked for clarification on the adjusted EPS revision lower in the 2026 outlook and inquired about the M&A pipeline, specifically if Loar anticipates an elevated deal rate or larger deal sizes compared to historical norms given the active market.

Answer

Dirkson Charles (CEO and Executive Co-Chairman) and Brett Milgrim (Executive Co-Chairman) clarified that the adjusted EPS revision is primarily due to non-cash items like transaction expenses, asset write-ups, amortization of intangible assets, and increased interest from the LMB and Harper acquisitions. Brett Milgrim confirmed that Loar expects an elevated M&A deal rate and potentially larger deal sizes, emphasizing discipline in asset quality and pricing, and stating that the 'one to two deals a year' is a historical proxy.

John Godyn asked for clarification on the downward revision of adjusted EPS in the outlook and inquired about the M&A pipeline, specifically if an elevated deal rate or larger deal sizes could be expected given the active market.

Answer

Dirkson Charles, CEO and Executive Co-Chairman, and Brett Milgrim, Executive Co-Chairman, explained the adjusted EPS revision was primarily due to non-cash items like transaction expenses, asset write-ups, intangible asset amortization, and increased interest from the LMB and Harper acquisitions. Brett Milgrim confirmed an active M&A market with more deal flow and sellers, indicating that while 1-2 deals per year is a historical proxy, an elevated rate or larger deals are possible, always balanced with disciplined returns.

Jon Godyn with Citigroup asked for more details on the EthosEnergy acquisition and HEICO's entry into the energy business (industrial gas turbines and aeroderivatives), including customer inquiries, component types, existing versus new SKUs, and OEM relationships. He also posed a big-picture question about the potential for this energy business to grow large enough to become a third HEICO segment over time.

Answer

Co-Chairman and Co-Chief Executive Officer Eric Mendelson explained HEICO's proactive pursuit of Ethos a year ago, seeing a strong market. He highlighted Ethos's strong OEM relationships, wide array of serviced products (blades, vanes, static/rotating parts), and technology alignment with HEICO, providing a great platform for market entry. Regarding the potential for a third segment, Eric Mendelson called it 'very aspirational' but expressed 'very high expectations' for the business, noting it's in 'early innings.'

Jon Godyn asked for a detailed discussion on HEICO's new energy business, EthosEnergy, including whether its entry was driven by customer inquiries, the types of components HEICO expects to supply (existing SKUs vs. new development), and the nature of OEM relationships. He also posed a big-picture question about the potential for this energy business to grow large enough to become HEICO's third reporting segment in the future.

Answer

Eric Mendelson, Co-Chairman and Co-CEO, explained that HEICO proactively pursued EthosEnergy for about a year, recognizing the strong growth in the industrial gas turbine and aeroderivative markets. He highlighted Ethos's strong OEM relationships and approvals, which HEICO will continue to support, and its wide array of products (blades, vanes, static/rotating parts, components). He expressed excitement about leveraging Ethos's technology and market access as a 'great entree' for HEICO into this growing market. While acknowledging the aspirational nature of a third segment, he stated HEICO has 'very high expectations' for the business, viewing it as being in 'early innings.'

John Godyn asked what factors would drive the low end versus the high end of the margin guide for 2026, and if there's room to exceed expectations. He also inquired about the shape of the 20% margin target, asking if there are any big milestones that would unlock a step change in margins or if it's expected to be ratable and linear over the next few years.

Answer

President and CEO John Cuomo explained that the low end of margins would be driven by natural mix and labor costs, while the high end could be driven by additional synergy opportunities, accelerating organic growth in higher-margin proprietary business, and faster process/efficiency improvements. He stated that the PAG acquisition will accelerate the path to 20% margins, with the gating factor being the execution of $15 million in first-phase synergies, aiming for the back end of 2027 rather than 2026.

John Godyn asked about the factors that would drive VSE's 2026 margin guidance to either the low or high end, and the potential to exceed expectations. He also sought elaboration on the shape of the 20% margin target, inquiring if major milestones would unlock step changes or if the progression would be more linear.

Answer

CEO John Cuomo identified natural mix and labor costs (if SG&A is tighter due to hiring for growth) as drivers for the low end of the margin guidance. For the high end, he cited additional synergy opportunities from acquired businesses, accelerating organic growth in higher-margin proprietary business, and faster process/efficiency improvements. He stated that the PAG acquisition would accelerate the path to 20% margins, with the first phase of $15 million in synergies being a key gating factor, aiming for the back end of 2027 rather than 2026.

John Godyn sought further elaboration on the drivers for Parsons' margin outlook, specifically operating leverage, accretive contracts, and growth in high-margin markets, and whether there's potential for upside to the year's margin guidance. He also asked if both Critical Infrastructure and Federal Solutions segments are expected to reach double-digit margins, or if CI will primarily drive the overall company average.

Answer

Matt Ofilos, CFO, expressed satisfaction with 110 basis points of margin expansion over the last two years, noting that despite a $350 million headwind from the confidential program in 2026, opportunities exist for further expansion through product growth, accretive M&A, and leverage. Ofilos projected CI margins to remain above 10% (10.5% at midpoint for 2026), while Federal Solutions is expected to trend from high eights/low nines short-term to mid-nines longer-term, driven by mix of work and product deliveries.

John Godyn asked about the drivers for Parsons' margin outlook, including operating leverage, growth in accretive contracts, and high-margin markets, and whether there's potential for upside to the margin guidance. He also questioned if both Critical Infrastructure and Federal Solutions segments are expected to achieve double-digit margins, or if Critical Infrastructure will continue to lead the company average.

Answer

Matt Ofilos, CFO, highlighted 110 basis points of margin expansion over the past two years, noting a $350 million headwind from the confidential program in 2026. He pointed to a 50% improvement in net EAC adjustments in 2025 and identified product expansion, accretive M&A, and leverage as opportunities for continued margin expansion. Ofilos expects Critical Infrastructure margins to remain above 10% (10.5% at midpoint for 2026). For Federal Solutions, he anticipates margins in the high eights to low nines short-term, trending towards mid-nines longer-term, driven by the mix of cost-plus versus fixed-price work and opportunities in product deliveries.

John Godyn questioned the expected seasonality of margins for 2026, specifically if the 2025 pattern (Q2 lower than Q1, Q4 significantly above Q1) would hold true for 2026, given the 13.5% Q1 margin guidance. He also asked if 4Q 2026 margins are expected to be considerably higher than Q1, and about Allegiant's playbook if a competitor airline were to liquidate.

Answer

Chief Commercial Officer Drew Wells stated that 2026 margin cadence depends on summer core demand, which they are taking a conservative view on. President and CFO Robert Neal added that modest MAX delivery delays will limit Q2 capacity. CEO Greg Anderson emphasized confidence in the full-year guide, but a measured approach due to early booking curves. Regarding a competitor liquidation, CEO Greg Anderson said Allegiant's success isn't dependent on others, and they have limited overlap, but Chief Commercial Officer Drew Wells confirmed they monitor industry capacity and have some slack to deploy if needed.

John Godyn asked for insights into what factors could drive SkyWest's 2026 EPS guidance higher than the mid-$11 area and how the company plans to strategically deploy its balance sheet, including potential changes to its approach to share buybacks or other capital allocation opportunities.

Answer

Rob Simmons, CFO, noted that strong demand in prorate and contract, along with increased utilization and the return of parked aircraft, could lead to upside in EPS. He emphasized an 'all of the above' capital allocation strategy, leveraging strong free cash flow for fleet investment, deleveraging, and share repurchases, given the company's strong balance sheet and liquidity.

John Godyn asked for insights into the factors that could lead to SkyWest's 2026 EPS guidance of mid-$11 potentially reaching $12, focusing on operating leverage. He also inquired about the company's strategy for balance sheet deployment, including potential changes in attitude toward share buybacks or other capital allocation opportunities.

Answer

Rob Simmons, CFO, noted strong demand in prorate and contract segments, contributing to the updated guidance. Wade Steel, Chief Commercial Officer, identified increased utilization, the return to service of parked aircraft, and prorate demand as key drivers for production and profitability. Rob Simmons stated that SkyWest is in an 'all of the above' position regarding capital allocation, able to invest in the fleet, delever the balance sheet, and continue share repurchases, given its strong free cash flow generation and balance sheet strength.

John Godyn asked about Textron's points of upside leverage within Bell and Systems in a scenario with a significantly higher defense budget. He also inquired if a higher budget would guide adding capabilities and accelerating growth in high-quality aerospace and defense areas, particularly space.

Answer

CEO Lisa Atherton identified several areas of leverage: the Sentinel program and hypersonics at Systems, the XM-30 and Marine Corps Armed Reconnaissance Vehicle programs, and the continued push for full-rate production of the MV-75. She also highlighted the steady Ship-to-Shore Connector program. She confirmed that a higher budget would guide adding capabilities, particularly in space defense, which she sees as a key growth area for future focus.

John Godyn asked about Textron's potential points of leverage in its defense portfolio in a higher budget environment and how a larger budget might influence adding new capabilities.

Answer

Lisa Atherton, CEO of Textron, identified several areas of leverage: the Sentinel program (hypersonics, thermal protective materials), the XM30 and Marine Corps Armed Reconnaissance Vehicle programs, and the accelerated MV-75 program moving quickly to full-rate production. She also mentioned the steady Ship-to-Shore Connector program. Atherton added that a higher budget could guide Textron to explore new growth areas, particularly in the space side of defense, either through existing assets or future acquisitions.

John Godyn inquired about the quarterly cadence of organic growth, seeking to reconcile the expected acceleration throughout 2026 with a strong Q4 2025. He also asked if the company would exit 2026 with significant momentum, leading to a substantial step-up in 2027.

Answer

Kathy Warden, Chair, CEO, and President of Northrop Grumman, explained that the expected cadence is due to a strong Q4 2025 (partially material timing) and fewer working days in Q1 2026. She confirmed that the backlog growth from 2025, especially in the space business, will ramp up in the second half of 2026, carrying momentum into 2027 across the portfolio.

John Godyn inquired about the quarterly cadence of organic growth, specifically how the projected acceleration throughout 2026 squares with a strong Q4 2025, and if the company expects to exit 2026 with significant momentum leading to a substantial step-up in 2027.

Answer

Chair, CEO, and President Kathy Warden explained that the Q4 2025 strength was partly due to material timing, and Q1 2026 has fewer working days, leading to a similar growth profile as 2025. She confirmed that the backlog growth from 2025, particularly in the space business, is expected to ramp up in the second half of 2026, carrying significant momentum into 2027 across the portfolio.

John Godyn asked for clarification on American Airlines' full-year guidance for 2026, particularly regarding potential conservatism given strong early-year bookings, and addressed competitor claims about Chicago hub profitability.

Answer

CFO Devon May indicated that the full-year guidance could prove conservative if current booking trends persist, especially given the Q1 forecast uncertainty due to Winter Storm Fern. CEO Robert Isom refuted claims about Chicago's unprofitability, emphasizing plans to restore it to mid-level profitability and the benefits of competition for customers.

John Godyn questioned American Airlines' full-year guidance, asking if it incorporates the strong booking trends observed early in the year and under what conditions the high end of the guidance range could be achieved. He also sought clarification on competitor claims regarding American Airlines' profitability in the Chicago hub.

Answer

CFO Devon May stated that the full-year guidance does not fully assume current strong booking trends will persist, suggesting that sustained strong bookings could lead to results closer to the high end of the guide. CEO Robert Isom affirmed that Chicago is expected to return to its pre-pandemic profitability levels, emphasizing the company's commitment to its team members, customers, and the community.

John Godyn asked how Booz Allen Hamilton strategically prepares for the possibility of a significantly larger defense budget, such as a $1.5 trillion budget, and how such potential growth influences the company's investment decisions and strategic thinking.

Answer

Chairman, CEO, and President Horacio Rozanski stated that Booz Allen has been preparing to support defense priorities, including recapitalizing the industrial base and integrating new technology for warfighters. He highlighted investments in growth vectors like cyber, AI, national security (space, border), and defense technology, leveraging commercial partners to bring solutions quickly, and building agility into their management motion to respond to dynamic funding environments.

John Godyn inquired about the commercial aftermarket backdrop, current momentum, and the underlying assumptions for the mid-teens services growth guidance in 2026, asking if there's potential to outperform if recent momentum continues.

Answer

Chairman and CEO Larry Culp noted continued tailwinds, strong backlog, and increased LEAP cycles, emphasizing that demand is robust but material availability and efficient shop visit execution are key. CFO Rahul Ghai added that both shop visits and spare parts are expected to grow mid-teens, with spare parts delinquency up 50% year-over-year, driven by narrow body and LEAP external channel growth. CFM56 retirements are trending better at a 2% range, supporting 2,300-2,400 shop visits through 2028.

John Godyn asked about the commercial aftermarket backdrop, inquiring if the strong momentum from Q4 2025 has continued into the new year and if there's potential to exceed the mid-teens services growth guidance for 2026.

Answer

Chairman and CEO Larry Culp stated that momentum continues with no pause, supported by a $190 billion backlog and increased LEAP cycle share. CFO Rahul Ghai added that spare parts delinquency was up 50% year-over-year, driven by narrowbody and LEAP external channel growth, with CFM56 retirements trending better at 2% for 2026, supporting 2,300-2,400 CFM shop visits through 2028.