Research Analyst at Melius Research
Scott Mikus is a Director of Aerospace, Defense and Space Research at Melius Research, specializing in in-depth equity analysis of major companies across the aerospace, defense, and space sectors. He focuses on leading industry names within these segments, leveraging his prior experience as an equity research associate at Credit Suisse where he covered Commercial Aerospace & Defense. Mikus began his career at BNY Mellon as an investment accountant before joining Credit Suisse, and currently provides fundamental investment research informed by rigorous accounting and finance expertise. A graduate of the University of Pittsburgh with a cum laude distinction and recipient of the AICPA’s Elijah Watt Sells Award, Mikus is recognized for his strong analytical skills and sector specialization.
Scott Mikus inquired about the uptick in USM sales, the visibility on whole assets coming to market, and the margin opportunity in parts supply.
CEO John Holmes noted a loosening of supply in the fourth and first quarters, driving growth in USM. He also stated that USM margins are currently depressed but are expected to expand as more supply comes to market.
Scott Mikus of Melius Research LLC asked for a breakdown of the Parts Supply segment's strong growth, whether airlines were pre-ordering ahead of tariffs, the sustainability of Parts Supply margins, and capital allocation priorities after reaching leverage targets.
CEO John Holmes reported that new parts distribution led growth at over 20% and saw no evidence of abnormal pre-ordering due to tariffs. He affirmed that Parts Supply can be a low-teens margin business with potential for mid-to-high teens with strong whole asset sales. CFO Sean Gillen outlined capital allocation priorities as organic investment, M&A, and then share repurchases over reinstating a dividend.
Scott Mikus of Melius Research LLC asked for details on the Parts Supply segment's strong growth, inquiring about a breakdown by end market and whether airlines were over-ordering ahead of tariffs. He also asked about the margin impact from a whole asset sale and future capital allocation plans once leverage targets are met.
CEO John Holmes clarified that new parts distribution led the segment's growth at over 20% and that there was no evidence of abnormal ordering due to tariffs. He described whole asset sales as a normal part of the USM business. CFO Sean Gillen stated that once leverage targets are met and absent M&A, the company would prioritize share repurchases over reinitiating a dividend for capital return to shareholders.
Scott Mikus questioned if the extended partnership with FTAI on CFM56 engines involved new economics and asked about AAR's strategy regarding potential tariffs, including pre-buying parts or potential benefits to the repair business.
CEO John Holmes explained the FTAI partnership extension continues a similar, successful arrangement with expectations for volume growth as FTAI's portfolio expands. On tariffs, he stated AAR is not pre-buying inventory but is focused on passing through price increases, a practice they've managed successfully in the current inflationary environment. He also noted tariffs could potentially benefit AAR's domestic repair business.
Scott Mikus inquired about the new distribution agreement with Chromalloy, asking if AAR could distribute PMA parts for CFM56 and V2500 engines and how that aligns with its FTAI joint venture. He also asked about AAR's revenue exposure to U.S. low-cost carriers and requested a breakdown of organic growth for the commercial and government segments.
John Holmes, an executive, explained that AAR is in discussions with both Chromalloy and FTAI to explore mutual growth opportunities. He clarified that AAR's exposure to low-cost carriers is minimal, as its business is heavily skewed towards major airlines like United, Delta, and American. Sean Gillen, an executive, noted that a specific organic growth breakdown by segment was not readily available.
Scott Mikus of Melius Research asked for a specific breakdown of the growth rates for defense and commercial sales within the new parts distribution business for the quarter.
Sean Gillen, VP and CFO, responded that he did not have the specific growth rates at his fingertips but indicated the information would be available in the forthcoming 10-Q filing.
Scott Mikus of Melius Research LLC asked about CACI's competitive approach to its bid pipeline, particularly the mix of new programs versus 'takeaway' work from incumbents, and questioned the impact of the ITAS contract's ceiling reduction.
President and CEO John Mengucci stated that CACI focuses on differentiated, high-value bids rather than being a traditional government services company pursuing a massive pipeline. He clarified that the majority of the pipeline is new work for CACI. Both Mengucci and CFO Jeffrey MacLauchlan affirmed that the ITAS ceiling reduction has zero impact on backlog, revenue, margins, or financial targets.
Scott Mikus inquired about contract growth trends since the change in administration and asked about the revenue backlog and major recompetes for fiscal year 2026.
CEO John Mengucci stated that CACI has not seen a material slowdown in contract growth, citing a strong Q3 book-to-bill and a growing pipeline of RFPs. For FY26, he noted it will be a moderate recompete year with no single program representing more than 5% of revenue. CFO Jeff MacLauchlan added that the business rhythm remains aligned with the company's 3-year financial targets.
Scott Mikus of Melius Research asked for CACI's recommendations to the new administration's Department of Government Efficiency (DOGE) and inquired about the impact of recent valuation deratings on the M&A market.
CEO John Mengucci recommended accelerating IT modernization with proper funding, establishing a national counter-UAS strategy, and improving acquisition official training to reduce protests. CFO Jeffrey MacLauchlan added that M&A valuation multiples have already moderated, but CACI's near-term capital deployment focus is on deleveraging after recent acquisitions.
Scott Mikus asked about potential market share gains for CACI's optical communications terminals due to a competitor's production issues and inquired if the Azure Summit acquisition could open up foreign military sales opportunities.
CEO John Mengucci confirmed that CACI has had discussions with other prime contractors regarding optical communications terminals, highlighting CACI's mature, U.S.-manufactured technology and reaffirming delivery targets. Regarding Azure Summit, he explained that its technology is applicable to Five Eyes nations and is a key part of CACI's strategy to expand internationally by integrating its software with Azure's hardware for U.S. customers first, then allies.
Scott Mikus of Melius Research LLC asked if TransDigm prioritizes engine content for M&A given its strong growth. He also questioned if selling assets to repurchase stock was a consideration, given high industry valuations.
Co-COO Mike Lisman stated that M&A is not prioritized by specific content like engines; the primary focus remains on proprietary components and achieving a 20% IRR target. He affirmed that the company is happy with its current portfolio of businesses and did not suggest any plans to sell assets.
Scott Mikus asked if share repurchases or special dividends are becoming a more regular component of capital allocation and questioned if a significant margin differential exists between engine and airframe components in the commercial aftermarket.
President and CEO Kevin Stein reiterated the company's established capital allocation priorities, confirming that returning capital via special dividends or buybacks remains a key option after funding internal projects and M&A. He characterized recent repurchases as opportunistic. Co-COO Mike Lisman stated there is "no meaningful difference" in margins between engine and non-engine aftermarket products.
Scott Mikus asked if orders from Boeing support its aggressive production ramp plans and questioned if the Q1 share buyback signals elevated M&A valuations or an attractive stock price.
Co-COO Joel Reiss stated they are not yet receiving orders for the back half of the year but are prepared to support the ramp. CEO Kevin Stein described the share buyback as an opportunistic move to return capital during market turmoil, clarifying it does not reflect a change in their M&A outlook or view on valuations.
Scott Mikus, on for Rob Spingarn, asked about capital deployment strategy, confirming if deploying over $7 billion was the right way to think about returning to the target leverage ratio of 6x, and inquired about the potential mix of M&A versus shareholder returns.
CEO Kevin Stein confirmed the math was 'directionally the right way to look at it' and reiterated the company's capital allocation priorities: first, reinvesting in the business; second, pursuing disciplined M&A; and third, returning capital to shareholders. CFO Sarah Wynne also confirmed the math was correct.
Scott Mikus of Melius Research LLC asked if there have been any discussions with the U.S. Department of Defense (DoD) about constructing or upgrading new heavy forging presses, given Howmet owns two of the four unique, large-scale presses in the country.
Executive Chairman and CEO John Plant responded that there have not been any such conversations. He acknowledged the critical importance of these assets to the defense industry, particularly for future fighter jet programs. Plant found the question interesting and suggested it might stimulate the company to initiate that conversation with the DoD regarding support for these vital national assets.
Scott Mikus from Melius Research asked if the previous five-year, $3.6 billion cumulative free cash flow target is now back on the table following recent tax law changes, and inquired about the capital and labor required if Newport News were to build Virginia-class submarines independently.
EVP and CFO Thomas Stiehle stated the five-year free cash flow guidance is not back on the table, as HII is focused on meeting its annual targets. President and CEO Christopher Kastner added that building Virginia-class subs alone would require 'significant capital' but that HII would have sufficient skilled labor for such a long-term project and supports the Navy exploring alternatives.
Scott Mikus asked if the cost-plus structure of the new Virginia contract indicates a trend for future orders and inquired about potential radar production constraints for the 'Golden Dome' initiative affecting Navy priorities.
President and CEO Christopher Kastner stated that the contract type was specific to the situation and not necessarily a future trend, as the priority is delivering wage support to the workforce. Regarding the 'Golden Dome,' Kastner confirmed HII has not been involved in any discussions related to radar supply for that initiative.
Scott Mikus asked about the lessons learned from the post-Katrina recovery that apply today and when investors might expect unfavorable EAC adjustments to turn positive. He also inquired if the 2025 shipbuilding operating income guidance contains a specific assumption for net EACs.
President and CEO Christopher Kastner highlighted transparency and resolve in negotiations as key lessons. CFO Thomas Stiehle added that success hinges on securing balanced contracts that reflect current economic realities and then executing consistently. Regarding EACs, Kastner noted there is no specific date for a turnaround but expects profitability to improve as the mix shifts away from pre-COVID contracts. Stiehle confirmed the guidance incorporates the current EAC trajectory based on performance and risk, but declined to provide a specific net EAC assumption.
Scott Mikus asked for management's perspective on the Submarine Advance Support (SAS) funding plan and whether a reported $17 billion funding shortfall for the Virginia-class program sounded accurate.
CEO Christopher Kastner voiced strong support for the SAS plan, calling it an 'excellent idea' and the 'smartest, best way' to unlock necessary investment in the workforce and infrastructure. He confirmed it remains under review. He declined to comment on the specific $17 billion figure or congressional funding actions, reiterating the focus on securing an equitable contract solution.
Scott Mikus of Melius Research inquired about the strategic implications of the A350 spoiler actuation win, asking if it signals more opportunities to displace incumbents and if Woodward intends to pursue more Tier 1 supplier work. He also asked for the quarter's price realization.
CEO Chip Blankenship described mid-program displacements as 'rare' but noted the win solidifies Woodward's position as a Tier 1 supplier to Airbus, which is strategic for future aircraft programs. CFO Bill Lacey stated that price realization was approximately 7% for the total company in the quarter, prompting an increase in the full-year forecast to nearly 7%.
Scott Mikus questioned the strategic fit of the volatile China on-highway business within Woodward's portfolio and asked for an update on production rates for the Boeing 787 program.
CEO Charles Blankenship stated that while the portfolio is always under review, the current focus for the China on-highway business is on operational readiness for market upticks. Regarding the 787, he confirmed they are meeting GE's demand for the GEnx engine and have the capacity to support future rate increases.
Scott Mikus inquired about the wide sales growth guidance for the Aerospace segment, the expected growth hierarchy among its end markets, and the current state of the supply chain compared to pre-pandemic levels.
CEO Charles Blankenship explained the wide guidance reflects uncertainty around Boeing's production ramp. He affirmed that Defense OE is expected to be the fastest-growing market for the year, despite a strong Q1 for commercial aftermarket which benefited from an easy comparison and is expected to moderate. He also noted that the supply chain has not returned to pre-COVID norms, with ongoing labor and quality challenges affecting about 15-20 key suppliers across both Aerospace and Industrial segments.
Scott Mikus asked about Woodward's potential to enter the Parts Manufacturer Approval (PMA) market for the CFM56-7B engine and questioned the drivers behind the strong Q4 defense OEM growth, specifically the role of JDAMs.
CEO Charles Blankenship stated that Woodward has no plans to become a PMA supplier, preferring to focus on its existing and future OEM content. CFO William Lacey confirmed that JDAMs contributed to the 40% defense OEM growth in Q4, but noted that growth was broad-based across the smart defense portfolio and is expected to continue in fiscal 2025.
Scott Mikus from Melius Research LLC asked about pricing protections in LTA negotiations, specifically whether Hexcel retains its internally-driven productivity gains, and inquired about the potential for a restocking benefit in 2026.
CEO Tom Gentile and CFO Patrick Winterlich explained that while contracts include inflation and volume protections, productivity gains are often shared with customers since their cooperation is required for process changes. They view supply chain synchronization, rather than significant restocking, as the primary goal, describing any potential restocking as a very gradual process.
Scott Mikus of Melius Research asked if Hexcel had approached its major customers, Boeing and Airbus, about repricing long-term agreements to offset inflation and production volatility. He also questioned if the Austrian facility could be repurposed for European defense programs if a sale is not completed.
Chairman, CEO and President Tom Gentile explained that they negotiate pricing with Boeing as shorter-term contracts expire. For the long-term A350 contract with Airbus, which runs to 2030, the focus is on joint productivity programs to share cost savings rather than repricing. He stated the Austrian facility is tailored for industrial production (wind, recreation) and is not suitable for producing aerospace-grade materials for defense programs.
Scott Mikus asked about potential discussions with Embraer on a new aircraft, the impact of tariffs on precursor chemicals, and whether upcoming union negotiations were factored into guidance.
Chairman, CEO & President Tom Gentile declined to comment on confidential customer discussions but noted Hexcel has minimal tariff exposure, sourcing 95% of materials from the US, Europe, and Japan. Executive Patrick Winterlich added that nothing out of the ordinary was factored into guidance for the union negotiation, and a mutual agreement is expected.
Scott Mikus from Melius Research questioned the strategy of hiring ahead of uncertain demand versus holding more buffer inventory and asked if incremental margins in 2025 could exceed the historical 30-35% range.
CEO Tom Gentile defended the hiring strategy, emphasizing that a trained, experienced workforce is a strategic asset that cannot be created quickly, unlike inventory. Executive Patrick Winterlich added that prepreg materials have a finite shelf life, limiting inventory builds. Regarding 2025 incrementals, he stated the company will drive them strongly but did not commit to a specific range above historical norms.
Scott Mikus of Melius Research LLC asked about the new Wolfpack program, its competitive dynamic with Aerojet's customers, and its long-term revenue potential.
Chairman and CEO Christopher Kubasik clarified that the Wolfpack launch effects program was in development before the Aerojet acquisition. He described it as a unique and affordable offering in the 'attributable' market with both kinetic and EW variants. He sees a revenue opportunity of a 'couple hundred million' in the next few years and noted the specific assets do not use solid rocket motors.
Scott Mikus from Melius Research inquired about the recently announced Wolfpack program, asking about the strategy of competing with Aerojet's largest customers and the potential long-term revenue opportunity.
Chairman & CEO Christopher Kubasik clarified that the Wolfpack initiative, a unique launch effects capability for kinetic strike and EW, was in development long before the Aerojet acquisition. He described the offerings as affordable and attributable, with over 40 test flights completed. He projected a potential revenue target of a "couple hundred million" in the next several years.
Scott Mikus asked about the capital and labor required if General Dynamics were to build Virginia-class submarines independently, and whether reinstated bonus depreciation drove the strong aerospace book-to-bill.
Chairman and CEO Phebe Novakovic stated that skilled labor is not a constraint for Electric Boat and that while some additional capital would be needed for independent production, it would not be an 'enormous amount.' Regarding aerospace demand, she said that while bonus depreciation helps, the strong orders were driven by multiple macroeconomic factors, not just one.
Scott Mikus asked about potential interest from the DoD in increasing the Columbia-class submarine program of record to maintain SLBM launch capability. He also asked if any Gulfstream customers accelerated deliveries to get ahead of tariffs.
Phebe Novakovic, Chairman and CEO, responded that the question of increasing the Columbia program size has been a recurring national security topic for over a decade but she hasn't heard anything new recently. Regarding Gulfstream, she stated she was not aware of any customers accelerating deliveries due to tariffs.
Scott Mikus of Melius Research asked about the prevalence of Economic Price Adjustment (EPA) clauses in fixed-price defense contracts to mitigate inflation, particularly at Marine Systems. He also questioned if Gulfstream's new plant in Mexicali was a strategic move to preempt potential tariffs.
Phebe Novakovic, Chairman and CEO, explained that while Marine contracts have always included escalation clauses, the recent, unexpectedly high level of inflation surpassed what those clauses contemplated. Regarding the Mexicali facility, she described it as part of long-term plans and stated the company would adapt to any future governmental policies as they are implemented.
Scott Mikus of Melius Research LLC asked if it would be logical to sell the F-35 technical data rights to the DOD to secure a minimum annual production rate and protect the program from being crowded out by other defense priorities.
CEO James Taiclet responded that such a deal is not necessary. He explained that Lockheed Martin has already provided the U.S. government with all the data it controls for aircraft maintenance. Furthermore, he believes the fundamental demand for the F-35 is secure, as retiring 4th-generation aircraft are 'incredibly unsurvivable' in modern combat, making the F-35 an essential capability.
Scott Mikus of Melius Research asked if it would be logical to sell the F-35's technical data rights to the DOD as part of a broader deal to secure a minimum annual purchase rate and protect the program from being crowded out by other modernization priorities.
CEO James Taiclet stated that such a deal is not necessary. He explained that Lockheed Martin has already provided the U.S. government with all the data it controls to maintain the aircraft. He also asserted that strong base demand for the F-35 will persist due to its unique survivability and capabilities compared to retiring 4th-generation aircraft.
Scott Mikus of Melius Research inquired about the GTF Hot Section Plus offering, asking if the retrofit cost is covered by RTX or the customer and whether to expect favorable EAC adjustments from the time-on-wing benefits.
CEO Christopher Calio explained that the cost arrangement will be a customer-by-customer determination, but RTX's intention is to receive value for the significant investment and its substantial time-on-wing benefits. CFO Neil Mitchill added that while the upgrade will drive benefits, the company is taking a prudent approach to program margins and is not getting ahead of itself on recognizing favorable contract adjustments.
Scott Mikus asked about the company's approach to the upcoming labor negotiation at Pratt & Whitney and if any contingency plans are in place to manage GTF AOGs in the event of a strike.
Executive Chairman and CEO Christopher Calio expressed cautious optimism about reaching an agreement without interruption. He cited a good track record in recent negotiations and a long-standing relationship with the union, emphasizing the shared interest in meeting strong customer demand.
Scott Mikus of Melius Research asked for details on the aircraft production rates (737, A320, 787) implied in RTX's guidance and requested an update on the certification timing for new business class seats at Collins.
Executive Christopher Calio declined to provide specific production rates ahead of airframer announcements but reiterated the company's mid-single-digit commercial OE growth forecast and its readiness to support customers. On the seating certification, he stated that while the requirements are complex, the company has a clear path forward.
Scott Mikus from Melius Research LLC inquired about the new HPT blades for the LEAP engine, asking about the fleet retrofit timeline and the potential for favorable contract margin reviews.
Chairman & CEO Lawrence Culp stated that the retrofit will be a multi-year process, occurring as engines naturally come in for shop visits rather than a dedicated campaign. He highlighted that the more producible blade is already helping improve output and contributed to the strong Q2 services revenue, which underpins the positive financial outlook for the program.
Scott Mikus of Melius Research asked how GE is balancing the need for aftermarket price increases against the risk of causing demand destruction or premature engine retirements, especially as some airlines see softening travel demand.
Chairman and CEO H. Culp acknowledged it is a balancing act guided by principles of sharing in value creation and earning returns on investment. He reiterated the multi-faceted pricing approach, including standard increases and temporary tariff surcharges. He expressed optimism that GE can manage these competing priorities constructively with customers without disrupting underlying demand for its services.
Scott Mikus from Melius Research asked if the current push for government efficiency could trigger another wave of industry consolidation and questioned if there was upside to margin guidance from further non-client-facing headcount cuts.
Horacio Rozanski, Chairman, CEO and President, acknowledged the industry is fragmented and expects share shifts but emphasized Booz Allen is aggressively positioning itself to win. Matthew Calderone, EVP and CFO, stated that while they are managing costs to protect margins during the Civil reset and preserve investment capacity, he would not anticipate near-term margin upside beyond the current guidance, though a long-term shift to outcome-based work could be accretive.
Scott Mikus from Melius Research questioned the decision to reaffirm guidance despite a strong Q1 EPS beat, asking if core fundamentals are expected to deteriorate or if the guidance is simply conservative.
CFO Chris Cage asserted that core business fundamentals are not a concern and remain strong. He explained that reaffirming guidance allows the company to maintain capacity to invest in critical areas aligned with its NorthStar 2030 strategy and administration priorities, stating it was not the right time to raise the outlook.
Scott Mikus questioned the 2025 EPS guidance, noting that after adjusting for 2024's one-time charges, it implies minimal underlying growth, and asked if this reflected conservatism.
CFO Chris Cage acknowledged the observation but cited several factors: the need for investment flexibility in a "pivot year," expected headwinds from higher interest rates on refinanced debt, a slightly higher tax rate, and the fact that 2024 benefited from an unusually strong year for program performance (EACs) that may not repeat at the same level.
Scott Mikus asked about the ramp-up of the CHS-6 program, which was won over a year ago, and whether its margins are currently accretive or dilutive to the overall business.
CFO Chris Cage explained that while the team has done a great job ramping CHS-6, its margins have not yet reached their full long-term potential. He noted that despite this, the National Security and Digital segment is performing well. CEO Thomas Bell added that Leidos is actively working to educate the Army on the full capabilities of the CHS-6 contract vehicle to help "supercharge that program" and drive future growth.
Scott Mikus asked about the operational impact of a recent explosion at a Utah plant on the Defense Systems outlook. He also inquired about the potential for a previously canceled classified space program to be restarted.
CEO Kathy Warden clarified the incident was at a Space Systems facility and there would be no impact on any programs, including Sentinel, as they have other sources of supply. Regarding the canceled space program, she said that if the requirement still exists, the program could be reevaluated, but this is not in current-year expectations.
Scott Mikus of Melius Research asked if a potential reevaluation of the NGAD program by the Air Force could free up funding to increase the B-21 bomber inventory from the planned 100 units to the desired 150 units.
Chair, CEO and President Kathy Warden acknowledged that the Air Force is conducting a force structure review that includes both NGAD and B-21. While it is premature to predict the outcome, she emphasized that Northrop Grumman's focus is on executing the B-21 program with strong performance and cost efficiency, thereby providing the Air Force with valuable options for its future force structure.
Scott Mikus asked about the contract structure for the F-47 program, specifically questioning if the low-rate initial production (LRIP) options are fixed-price and how the company is managing potential risks from those options.
President and CEO Robert Ortberg stated that he could not disclose contract details beyond what the U.S. Air Force has made public. However, he reassured that the company adhered to its strategy of matching contract type to the work, ensuring Boeing did not sign up for undue risk similar to past fixed-price development programs.
Scott Mikus of Melius Research asked about HEICO's leverage philosophy, questioning if there was a fundamental shift in how much leverage the company would operate with, and also inquired about supply chain performance at both FSG and ETG.
Laurans Mendelson, Chairman and CEO, stated there is no change in their leverage philosophy, remaining comfortable operating around 2x EBITDA but willing to go to 3x for a desirable acquisition due to strong cash flow. Victor Mendelson, Co-President, described supply chain issues as being at "noise level" now, with significant improvement. Eric Mendelson, Co-President, noted the supply chain is getting better but not great, with labor being a key issue for suppliers.
Scott Mikus from Melius Research, on for Rob Spingarn, asked for the percentage of Flight Support Group sales to the DoD, whether a list of potential parts for the DoD has been created, and the progress on in-sourcing manufacturing from Wencor's former build-to-print shops.
Co-President Eric Mendelson stated that defense sales are approximately one-quarter of the Flight Support Group's total sales and confirmed that HEICO has identified substantial opportunities for the DoD. Regarding Wencor, he affirmed that HEICO is leveraging its broad manufacturing capabilities for Wencor's new product development, seeing a very strong opportunity for further in-sourcing and cost savings.