Rockwell Collins, Inc.
) has provided an update on its fiscal year 2014 guidance and
reaffirmed its guidance for 2013.
The company expects revenue in the range of $4.5 billion to $4.6
billion and earnings per share in the range of $4.30 to $4.50 for
FY14. In FY14, total segment operating margins are expected in
the range of 21.0% to 22.0% and cash flow from operations in the
range of $550 million to $650 million. The guidance excludes the
impact of the proposed acquisition of ARINC Inc. The transaction
will be closed after receiving regulatory approval. The company
plans to update its guidance once the transaction is closed.
The company expects research and development (R&D) investment
to be approximately $950 million in 2014.
Market conditions in fiscal 2014 are expected to remain flat with
FY13. The company expects to experience strong revenue growth at
its air transport business driven by the 787 and A350 aircraft.
However, the company expects a slight decline in business jet
revenue. With the completion of the ARINC acquisition, a
stabilizing defense market, continued robust air transport market
and the benefits of new aircraft entering into service across
commercial markets, the company expects to return to growth in
In FY14, the company expects revenue from Commercial Systems to
increase by mid-single digits year over year. However, it expects
revenue from Government Systems to decrease by mid-to-high single
digits compared to 2013. The decline reflects sequestration cuts
of $200 million partially offset by an increase in international
defense sales and increased production in Avionics, including
KC-10 and E-6B aircraft upgrades as well as higher deliveries for
the JHMCS and JSF helmets.
Rockwell Collins maintained its FY13 guidance as provided on its
third quarter fiscal year 2013 earnings call in Jul 2013. The
company expects earnings per share in the range of $4.55-$4.60
and total sales to be around $4.65 billion. The R&D
investment forecast is also expected to be approximately $950
million. Cash flow from operations is expected to be around $600
In Jul 2013, Rockwell Collins posted third quarter fiscal year
2013 earnings of $1.20 per share, surpassing the Zacks Consensus
Estimate of $1.15 by 4.3% and 5.3% above the year-ago figure of
$1.14. Total sales slipped 3.3% year over year to $1.17 billion.
However, the figure came in line with the Zacks Consensus
The Zacks Consensus Estimate for the fourth quarter is expected
to be flat year over year at $1.32 per share. For the current
fiscal year, the Zacks Consensus Estimate is $4.60 per share, up
4.30% year over year.
Rockwell Collins is the foremost global supplier of
communications and avionics equipment for both commercial and
military customers. Its balanced exposure to both types of
customers allows the company to use government funding to develop
products for the dual-end market. Despite these positives, we
remain concerned about the company's short-cycle products, the
U.S. government's delayed funding authorizations, program
execution risk, dependence on international sales, high exposure
to fixed price contracts and high research & development
overhead. The company presently retains a short-term Zacks Rank
Among the stocks worth considering in the space are
Alliant Techsystems Inc.
Elbit Systems Ltd.
B/E Aerospace Inc.
). While Alliant Techsystems and Elbit Systems hold a Zacks Rank
#1 (Strong Buy), B/E Aerospace carries a Zacks Rank #2 (Buy).
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