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What to Expect From Rockwell Collins (COL) in Q3 Earnings?

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Aviation electronics maker, Rockwell Collins Inc. (COL - Free Report) , is slated to report third-quarter fiscal 2017 results on Jul 28, before the opening bell.

In the last reported quarter, the company delivered a positive earnings surprise of 2.29%. Moreover, it surpassed earnings estimates in each of the trailing four quarters with an average positive surprise of 2.45%.

Let’s see how things are shaping up for this announcement.

Factors at Play

In the defense arena, Trump’s victory in the Presidential race has likely turned out to be a significant growth catalyst for Rockwell Collins and other defense majors. In particular, the outlook for stocks in this space has improved manifold in the recent months, primarily owing to enhanced spending promises made by Trump in his latest “America First” budget.

Following Trump’s budget proposal release in Mar 2017, the U.S. defense contractors are witnessing increased order from across the world, which increases investors’ optimism in such stocks.

Consequently, during the fiscal third quarter, the company clinched a number of contracts. It signed a global alliance agreement with QinetiQ to collaborate on the development of next-generation, multi-constellation open service and secure Global Navigation Satellite System (GNSS) receivers. The accord will support the critical mission needs of military, government and critical national infrastructure.

Again, Rockwell Collins inked a reseller agreement with Beijing Marine Communication and Navigation Company, Limited (MCN) to provide broadband satellite connectivity services to its ARINC Direct customers in mainland China. These agreements are expected to have a material impact on the company’s financials in the to-be-reported quarter.

For the quarter, the Zacks Consensus Estimate for earnings reflects a 3.2% year-over-year decline. Meanwhile, revenues are estimated to be $2.03 billion, translating into 51.9% growth year over year.

Earnings Whispers

Our proven model does not conclusively show that Rockwell Collins will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: Rockwell Collins has an Earnings ESP of -1.27%. This is because the Most Accurate estimate is pegged at $1.56, lower than the Zacks Consensus Estimate of $1.58. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Rockwell Collins has a Zacks Rank #3, which increases the predictive power of ESP. However, the negative ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrants a Look

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Raytheon Company (RTN - Free Report) is slated to report second-quarter 2017 results on Jul 27. The company has an Earnings ESP of +0.57% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Spirit Aerosystems Holdings, Inc. (SPR - Free Report) is scheduled to report second-quarter 2017 results on Aug 2. The company has an Earnings ESP of +1.65% and a Zacks Rank #3.

Transdigm Group Incorporated (TDG - Free Report) is expected to report second-quarter 2017 results on Aug 8. The company has an Earnings ESP of +1.01% and a Zacks Rank #2.

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