On Nov 21, 2013, we have reiterated our Neutral recommendation
Rockwell Collins Inc.
). The company currently has a Zacks Rank #3 (Hold).
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Why the Reiteration?
Rockwell Collins' earnings in the fourth quarter of fiscal 2013
were $1.28 per share, lagging behind the Zacks Consensus Estimate
by 3 cents. On a year-over-year basis, earnings per share jumped
20.8% on the heels of lower share count and absence of
restructuring and asset impairment charges. The company's total
sales edged down 1.1% year over year to $1,252 million. However,
quarterly revenues surpassed the Zacks Consensus Estimate by $28
million. A decline in sales in Government Systems was partially
offset by higher sales in Commercial Systems.
We appreciate Rockwell Collins' efforts towards managing risks
related to the ongoing defense budget sequestration. The company
is currently focusing more on expanding its international
businesses, which will in turn help to secure stable revenue
stream going forward. In addition, the company is upgrading its
core competence while engaging in innovation.
Rockwell Collins is also taking several initiatives including
steady share repurchase program and payment of dividend at
regular intervals, to maximize shareholders' wealth. In fiscal
2013, the company distributed $164 million to its shareholders as
cash dividend. During fourth-quarter of fiscal 2013, the company
repurchased 0.9 million shares of common stock worth $62 million.
These initiatives will enable Rockwell Collins to attract more
Despite the aforesaid positives, we remain cautious about the
company's short-cycle products, the U.S. government's delayed
funding authorizations, program execution risk and high exposure
to fixed price contracts. These negatives may to some extent
challenge Rockwell Collins' future performance.
Other Stocks to Consider
Stocks in the sector that are currently performing well include
Alliant Techsystems Inc.
) with a Zacks Rank #1 (Strong Buy), and
) with a Zacks Rank #2 (Buy).