Rockwell Collins Inc.
) in the light of anticipated cuts to the U.S. defense budget
expects fiscal 2013 earnings per share in the range of $4.30-$4.50,
revenue between $4.6-$4.7 billion, and cash flow from operations of
$500-$600 million. Total segment operating margins are estimated to
be in the 21.0%-22.0% range.
In contrast to fiscal 2012, Rockwell Collins expects earnings per
share in the range of $4.40 to $4.50, revenue of approximately
$4.80 billion, and segment operating margin of 21.5%.
The downcast in fiscal 2013 outlook is owing to the effect of the
Budget Control Act of 2011 which requires reductions or
sequestration to U.S. defense spending beginning on January 2,
2013, the impact of which has been incorporated in the guidance.
Commercial Systems provides aviation electronics systems, products
and services to air transport, business and regional aircraft
manufacturers and airlines worldwide. Commercial Systems' fiscal
year 2013 revenue is expected to increase by about 7% from 2012
Of this sales to aircraft Original Equipment Manufacturers (OEMs)
are expected to increase in the high single digits across both the
air transport, and business and regional markets. Sales to air
transport aircraft OEMs should benefit from both
The Boeing Company
) 787 series airplane production rate increase as well as the
planned production rate increases of other Boeing and Airbus legacy
aircraft. Business and regional jets OEM sales should improve due
to modest production rate increases across most OEM customers.
Aftermarket sales for 2013 are expected to increase in the low
double digits. The sales increase is expected to be driven by
revenue from retrofits. Additionally, the company expects growth
from business jet cockpit upgrades, air transport spares for 787
and higher service and support revenue across both markets.
Sales of wide-body in-flight entertainment products and services
are expected to decrease by about 15%, or approximately $15
million, due to the company's decision in 2005 to cease investing
in this product area.
Government Systems provides avionics, communication and navigation
products, and surface solutions to the U.S. Department of Defense,
state and local governments, other government agencies, civil
agencies, defense contractors and foreign ministries of defense
around the world. Government Systems' fiscal year 2013 revenue is
expected to decrease by approximately 10%, with about half of the
year-over-year decline resulting from the impact of sequestration.
The remaining decline is primarily attributable to a $100 million
reduction in revenue from certain programs completing the
development phase and expected to begin full scale production
beyond 2013. In addition to the program transitions, the company
expects increased deliveries of
General Dynamics Corporation
) Joint Tactical Radio System Manpack radios, Firestorm targeting
systems and higher tanker sales to be mostly offset by lower
product deliveries of Defense Advanced GPS Receiver and satellite
communication terminals, the delay in the Eurofighter Tranche III
and the lingering impact of programs and product lines terminated
Earlier, Rockwell's share buyback program played an important role
in improving its third quarter earnings for the period ending June
30, 2012. The company's balanced business model and capital
deployment strategies provide stability to the shareholders of the
company in the current challenging environment.
Moreover, the company's balanced exposure to commercial and
military customers allows it to use government funding to develop
products for its communications and avionics market.
However, the U.S. government's delayed funding authorizations,
program execution risk, dependency on international sales, high
exposure to fixed price contracts and high research and development
overheads are a matter of concern for the company. The company
presently retains a short-term Zacks #3 Rank (Hold) that
corresponds with our long-term Neutral recommendation on the stock.
Based in Cedar Rapids, Iowa, Rockwell Collins designs,
manufactures, and supports software and hardware solutions for
aircraft communication, navigation, signals intelligence, and
weapons systems as well as surveillance systems for government,
military, and commercial applications.
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