Rockwell Collins Inc.
(
COL
) reported fourth quarter fiscal 2012 earnings results ending
September 30, 2012. The company reported adjusted earnings per
share of $1.32, beating our expectation of $1.09 for the quarter.
Earnings were up 17.0% year over year.
GAAP earnings per share during the fourth quarter were $1.06
versus $1.02 in the prior-year period. The difference between
operating and GAAP earnings in the fourth quarter was due to a
restructuring and assets impairment charge of 26 cents.
Fiscal year 2012 earnings per share of the company were $4.41
versus $4.05 in the previous year, reflecting growth of 9%. The
year-over-year growth in earnings per share stemmed from an
improvement in total segment operating earnings and a favorable
impact from share buybacks.
GAAP earnings per share during the fiscal year were $4.15
versus $3.94 in the prior year. The difference between operating
and GAAP earnings was due to a restructuring and assets
impairment charge of 26 cents.
Total Revenue
Rockwell Collins' total sales in the fourth quarter of fiscal
2012 were down 2% year over year to $1,266 million. Revenues
missed the Zacks Consensus Estimate of $1,324 million.
Rockwell Collins' total sales in fiscal 2012 were down 2% year
over year to $4,726 million. Revenues missed the Zacks Consensus
Estimate of $4,786 million.
The year-over-year decline in revenue in both the fourth
quarter and the fiscal year 2012 was due to lower sales from
Government Systems, marginally offset by higher sales from
Commercial Systems.
Segmental Revenue
Commercial Systems
: In the reported period, Commercial Systems sales of $565
million were up 9% from $517 million in the prior-year period.
By product category, sales related to aircraft original equipment
manufacturers were up 15% year over year to $307 million driven
by increased sales to Airbus and
The Boeing Company
(
BA
) led by higher production rates of the 787, 737 and A320
aircrafts. However, these positives were partially offset by
lower deliveries to Hawker Beechcraft as a result of a temporary
production shutdown.
Aftermarket sales at Commercial Systems were up 12% year over
year to $239 million.
Government Systems
: Government Systems sales were $701 million, down 10% from $779
million in the fourth quarter of fiscal 2011.
By product category, Avionics sales were down 5% year over year
due to the completion of certain rotary wing and unmanned aerial
system programs, and from lower development sales as the E-6
program transitions to production.
Communication product sales decreased 6.0% year over year,
primarily due to the wind down of the JTRS GMR development
program.
Surface solutions sales decreased $39 million, or 40%, due to
discontinuation of investment in public safety vehicle systems
and the completion of certain surface based programs.
Operational Update
Total research and development expenses in fiscal 2012 were
$946 million, down 8.2% year over year. Segment operating
earnings in the fiscal were $1,008 million, up 3.6% year over
year from $973 million.
Financial Condition
As of September 30, 2012, cash and cash equivalents were $335
million versus $530 million as of September 30, 2011. Long-term
debt, net was $779 million versus $528 million as of September
30, 2011.
Cash flow from operation at the end of the year was $534 million
versus $657 million in the year-ago period.
Rockwell's disciplined capital management led to enhanced
shareholder value during the fourth quarter of fiscal 2012. The
company repurchased 0.4 million shares of its common stock for
$21 million and paid a dividend of 30 cents per share to its
shareholders.
Guidance for Fiscal 2013
For fiscal 2013, Rockwell Collins expects total revenue in the
range of $4.60 billion to $4.7 billion. The company expects
segment operating margin to be between 21.0% and 22%. It expects
earnings in the range of $4.30 to $4.50 per share. It expects
research & development expenses to be approximately $1,000
million, with capital expenditure expected to be about $140
million.
Our Take
Rockwell's share buyback program played an important role in
improving its overall performance. We believe the remaining share
repurchase authorization of $481 million at the end of the fiscal
2012 will enable the company to shore up shareholder wealth in
fiscal 2013.
The majority of Rockwell's revenue were generated from
government contracts. The declining trend at this segment in both
the quarter and fiscal year 2012 are a bit alarming.
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. The company presently retains
a short-term Zacks #4 Rank (Sell rating)
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. With a market
capitalization of $7.82 billion, the company has 20,500 full-time
employees.
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