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Rockwell Collins (COL) Tops Q1 Earnings, Keeps FY17 View

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Rockwell Collins Inc. 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 to 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 $900−$950 million band.

The full-year tax rate is still projected to be 28–29%.

Price Movement

Rockwell Collins’ stock has gained about 5.6% in the last three months, underperforming the Zacks categorized Aerospace-Defense Equipment industry’s gain of 7.8%. This is probably due to tough competition faced by the company, its exposure to fixed-price contract, and vulnerability to foreign currency fluctuations.



Upcoming Peer Releases

Raytheon Company is scheduled to release fourth-quarter earnings on Jan 26. This Zacks Rank #3 (Hold) company’s Zacks Consensus Estimate stands at $1.86. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Spirit AeroSystems Holdings, Inc. (SPR - Free Report) , another Zacks Rank #3 stock, is scheduled to release fourth-quarter earnings on Feb 1. The Zacks Consensus Estimate stands at $1.02.

Triumph Group, Inc. (TGI - Free Report) is scheduled to release fourth-quarter earnings on Feb 2. Its Zacks Consensus Estimate stands at $1.26. The company carries a Zacks Rank #3 too.

Zacks Rank

Rockwell Collins currently has a Zacks Rank #4 (Sell).

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