Rockwell Beats, Reaffirms Outlook - Analyst Blog


Rockwell Collins Inc. ( COL ), the supplier of avionics and military equipment, outpaced the Zacks Consensus Estimate of 85 cents with earnings of 86 cents per share in the first quarter of fiscal year 2012 ending December 31, 2011. However, results came in below the year-ago quarterly earning per share of 96 cents.

Operational Performance

Rockwell Collins' total sales fell 1% year over year to $1.09 billion, in line with the Zacks Consensus Estimate. In the reported quarter, Government Systems sales slipped, partially offset by higher Commercial Systems sales.

Total operating earnings increased 2% to $218 million, or 19.9% of sales, in the reported quarter from $213 million, or 19.3% of sales, in the year-ago quarter. Overall, Rockwell Collins reported net income of $130 million, a decrease of $21 million, or 13.9% as compared to the year-ago quarter.

Segmental Performance

Government Systems: Government Systems sales were $583 million, a decrease of $67 million, or 10%, compared with $650 million reported for the same period last year.

By product category, Avionics sales increased $9 million, or 3%, year over year, due to increased sales of tanker and rotary-wing programs. This was partially offset by a decline resulting from the completion of deliveries for the KC-135 GATM program and a reduction in simulation and training program revenues.

Communication product sales declined by $12 million, or 8%, primarily due to lower Joint Tactical Radio System revenue for the Ground Mobile Radio variant as well as lower deliveries of satellite communication terminals.

Surface solutions sales decreased $46 million, or 43%, resulting from the impact of two programs terminated in the third quarter of 2011 and fewer deliveries of public safety vehicle systems.

Sales of Navigation products decreased by $18 million, or 25%, driven by fewer deliveries of Defense Advanced GPS Receiver products.

In the reported quarter, Government Systems operating earnings of $117 million resulted in an operating margin of 20.1%, compared with operating earnings of $131 million, and an operating margin of 20.2%, for the same period last year. The decrease in operating earnings was primarily due to lower sales volume.

Commercial Systems: In the reported period, Commercial Systems sales of $511 million rose $57 million, or 13%, compared with sales of $454 million reported for the same period last year. 

By product category, sales related to aircraft original equipment manufacturers increased $32 million, or 14%, to $265 million year over year. This was primarily due to higher product deliveries for its commercial aerospace customers. This includes the likes of The Boeing Company ( BA ) for its 777 and 747-8 series jetliners; and multiple platforms for Canadian aircraft manufacturer, Bombardier Inc.

Aftermarket sales increased $27 million, or 14%, to $221 million year over year. This was primarily driven by increased sales of spares to Boeing, para-military programs, Chinese regional aircraft and higher service-cum-support sales. 

Commercial Systems operating earnings increased $19 million, or 23%, to $101 million, resulting in an operating margin of 19.8%, compared with operating earnings of $82 million, and an operating margin of 18.1%, for the same period a year ago. The increase in operating earnings and margin was primarily attributable to higher sales volume.

Financial Condition

Rockwell Collins ended the quarter with cash and cash equivalents of $286 million. At year-end fiscal 2011, ending on September 30, 2011, the company had $530 million in cash. Long-term debt excluding current maturity was $777 million versus $528 million at fiscal-end 2011, ending on September 30, 2011. This was due to the issue of $250 million of unsecured ten-year notes at an interest rate of 3.10%. 

Rockwell Collins used $64 million of cash for operating activities in the reported quarter. At the end of the year-ago period the company generated $57 million of cash from operating activities. In the reported quarter, the company repurchased 7.1 million shares of its common stock at a total cost of $385 million, leaving $318 million of authorized share repurchase pending.


Rockwell Collins reaffirmed its fiscal 2012, ending on September 30, 2011, guidance.

The company expects fiscal year 2012 total sales to be between $4.9 billion and $5.0 billion, with earnings from continuing operations in the range of $4.40 to $4.60 per share.

Rockwell Collins currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BA , COL

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