On Mar 7, 2014, we issued an updated research report on
Rockwell Collins Inc.
). Recently, this aviation and military electronics maker posted
strong fiscal first quarter 2014 results with the top and bottom
line coming in above the Zacks Consensus Estimate.
The upcast in earnings reflects solid contribution from its
Commercial Systems and Government Systems segments. Rockwell
Collins delivered a positive earnings surprise in three out of
the last four quarters, with an average beat of 0.99%. These
results reflect the company's strong operational performance.
Again, the company completed the acquisition of airline
communications and information processing solution major, ARINC
Inc., a portfolio company of The Carlyle Group, for $1.42 billion
during the quarter. The integration of ARINC's high-quality
ground network and services will definitely boost Rockwell
Collins' existing information management capabilities with its
application beyond avionics and cabin technologies. ARINC is a
frontrunner in the aviation management industry and offers
technical support to almost every sphere of the airline business
starting from pilots, operators, maintenance, passengers, and
controllers to regulators, security and airport operations.
Although the recent Omnibus bill came as a sign of relief for the
defense companies, Rockwell Collins is also focusing more on
expanding its international businesses to combat the effect of
budget cut. This will certainly help to secure a stable revenue
stream going forward. In addition, the company is upgrading its
core competence besides engaging in innovation. In this
connection, it is worth mentioning that the Omnibus bill provides
Pentagon with nearly $93 billion to buy weapons and another $63
billion for research and development.
In its first quarter of fiscal 2014 earnings call, the company
lifted its fiscal 2014 outlook. The company now expects revenue
in the range of $4.95 billion to $5.05 billion (up from
$4.50-$4.60 billion) and earnings per share in the range of $4.35
to $4.55 (up from $4.30-$4.50). Total segment operating margins
are expected in the range of 20% to 21% versus its earlier
expectation of 21% to 22%.
However, going forward, the defense sector will still continue to
face headwinds as Pentagon's spending moderates from historical
Key Picks from the Sector
Rockwell Collins currently carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the industry include
Alliant Techsystems Inc.
BAE Systems plc
). All these stocks hold a Zacks Rank #1 (Strong Buy).
ALLIANT TECHSYS (ATK): Free Stock Analysis
ASTRONICS CORP (ATRO): Free Stock Analysis
BAE SYSTEMS-ADR (BAESY): Get Free Report
ROCKWELL COLLIN (COL): Free Stock Analysis
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