It has been about a month since the last earnings report for Rockwell Collins, Inc. . Shares have added about 4.8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Rockwell Collins Tops Q1 Earnings, Keeps FY17 View
Rockwell Collins reported financial results for first-quarter fiscal 2017, ended Dec 31, 2016. The company’s adjusted earnings per share of $1.20 surpassed the Zacks Consensus Estimate of $1.15 by 4.3%. Reported earnings, however, slipped 0.8% from $1.21 per share earned a year ago.
Revenues
In the fiscal first quarter, Rockwell Collins’ total sales was $1,193 million, missing the Zacks Consensus Estimate of $1,204 million by 0.9%. Revenues, however, grew 2.1% year over year driven by higher sales at Government Systems and Information Management Services.
Operational Highlights
Total segment operating income during the quarter was $251 million, up 6.8% from $235 million in the year-ago quarter.
Rockwell Collins’ total research and development investment (including the increase in pre-production engineering costs) was $210 million, down 7.9%. The figure represented 17.6% of total quarterly sales, compared with 19.5% in the year-ago period.
Segment Performance
Commercial Systems: In the quarter under review, segmental sales of $549 million were down 2.3% year over year, primarily due lower business aircraft OEM production rates.
Operating earnings for the quarter were $125 million, same as the year-ago number. Operating margin expanded 60 basis points (bps) to 22.8%. Margins were driven by lower research and development expense, and cost saving initiatives.
Government Systems: The segment reported sales of $475 million, up 5.3% on the back of higher simulation and training program revenues, and higher fixed-wing platform revenues.
Operating earnings for the quarter were $96 million, up 11.6% from $86 million in the year-ago period. Operating margin expanded 110 bps to 20.2%, primarily driven by higher sales volume and cost savings initiatives.
Information Management Services: Segment sales were $169 million, up from $156 million in the year-ago period on the back of double-digit growth in aviation-related sales.
Operating earnings for the quarter were $30 million, up from $24 million in the year-ago period. Operating margin was 17.8% compared with 15.4% a year ago. The increase was primarily due to higher sales volume.
Financial Condition
As of Dec 31, 2016, Rockwell Collins’ cash and cash equivalents were $308 million, compared with $340 million as of Sep 30, 2016.
Long-term debt (net) was $1,356 million as of Dec 31, 2016, down from $1,374 million as of Sep 30, 2016.
Cash used for operating activities in first-quarter fiscal 2017 was $101 million, compared with $91 million a year ago.
Fiscal 2017 Guidance
The company has reiterated its fiscal 2017 revenue guidance in the range of $5.3–$5.4 billion.
Total segment operating margin is still expected to be about 21%.
The company still expects cash flow from operations in the range of $600−$700 million. Its R&D expenditure guidance was reiterated in the band of $900−$950 million.
The full-year tax rate is still projected to be in the range of 28–29%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimate. There has been one revision higher for the current quarter compared to two lower.
VGM Scores
At this time, Rockwell Collins' stock has a subpar Growth Score of 'D', however its Momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions look promising. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Rockwell Collins (COL) Up 4.8% Since the Last Earnings Report?
It has been about a month since the last earnings report for Rockwell Collins, Inc. . Shares have added about 4.8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Rockwell Collins Tops Q1 Earnings, Keeps FY17 View
Rockwell Collins reported financial results for first-quarter fiscal 2017, ended Dec 31, 2016. The company’s adjusted earnings per share of $1.20 surpassed the Zacks Consensus Estimate of $1.15 by 4.3%. Reported earnings, however, slipped 0.8% from $1.21 per share earned a year ago.
Revenues
In the fiscal first quarter, Rockwell Collins’ total sales was $1,193 million, missing the Zacks Consensus Estimate of $1,204 million by 0.9%. Revenues, however, grew 2.1% year over year driven by higher sales at Government Systems and Information Management Services.
Operational Highlights
Total segment operating income during the quarter was $251 million, up 6.8% from $235 million in the year-ago quarter.
Rockwell Collins’ total research and development investment (including the increase in pre-production engineering costs) was $210 million, down 7.9%. The figure represented 17.6% of total quarterly sales, compared with 19.5% in the year-ago period.
Segment Performance
Commercial Systems: In the quarter under review, segmental sales of $549 million were down 2.3% year over year, primarily due lower business aircraft OEM production rates.
Operating earnings for the quarter were $125 million, same as the year-ago number. Operating margin expanded 60 basis points (bps) to 22.8%. Margins were driven by lower research and development expense, and cost saving initiatives.
Government Systems: The segment reported sales of $475 million, up 5.3% on the back of higher simulation and training program revenues, and higher fixed-wing platform revenues.
Operating earnings for the quarter were $96 million, up 11.6% from $86 million in the year-ago period. Operating margin expanded 110 bps to 20.2%, primarily driven by higher sales volume and cost savings initiatives.
Information Management Services: Segment sales were $169 million, up from $156 million in the year-ago period on the back of double-digit growth in aviation-related sales.
Operating earnings for the quarter were $30 million, up from $24 million in the year-ago period. Operating margin was 17.8% compared with 15.4% a year ago. The increase was primarily due to higher sales volume.
Financial Condition
As of Dec 31, 2016, Rockwell Collins’ cash and cash equivalents were $308 million, compared with $340 million as of Sep 30, 2016.
Long-term debt (net) was $1,356 million as of Dec 31, 2016, down from $1,374 million as of Sep 30, 2016.
Cash used for operating activities in first-quarter fiscal 2017 was $101 million, compared with $91 million a year ago.
Fiscal 2017 Guidance
The company has reiterated its fiscal 2017 revenue guidance in the range of $5.3–$5.4 billion.
Total segment operating margin is still expected to be about 21%.
The company still expects cash flow from operations in the range of $600−$700 million. Its R&D expenditure guidance was reiterated in the band of $900−$950 million.
The full-year tax rate is still projected to be in the range of 28–29%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimate. There has been one revision higher for the current quarter compared to two lower.
Rockwell Collins, Inc. Price and Consensus
Rockwell Collins, Inc. Price and Consensus | Rockwell Collins, Inc. Quote
VGM Scores
At this time, Rockwell Collins' stock has a subpar Growth Score of 'D', however its Momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions look promising. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.