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Rockwell Collins (COL) Top Q1 Earnings, Ups FY16 View

Rockwell Collins Inc.COL reported financial results for first-quarter fiscal 2016 ended Dec 31, 2015. The company's adjusted earnings per share of $1.21 surpassed the Zacks Consensus Estimate of 98 cents by 23.5%. The reported earnings also improved 10% from the adjusted profit level of $1.10 per share reported in the prior-year period.

Rockwell Collins Inc. (COL) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Revenues

In the fiscal first quarter, Rockwell Collins' total sales were $1,169 million, missing the Zacks Consensus Estimate of $1,211 million by 3.5%. Revenues decreased 4.6% year over year on lower sales across the commercial and government systems.

Operational Highlights

Total segment operating income during the quarter was $235 million, down 6.7% from $252 million in the year-ago quarter.

Rockwell Collins' total research and development investment (including the increase in pre-production engineering costs) was $228 million, down 1.3% year over year. The figure represented 19.5% of quarterly sales.

Segment Performance

Commercial Systems: In the quarter under review, segmental sales of $562 million were down 1.1% year over year primarily due lower original equipment sales and wide-body in-flight entertainment, which were partially offset by higher aftermarket sales.

Government Systems: The segment reported sales of $451 million, down 11.4% from the prior-year figure, due to lower contributions from Avionics, Communication and Navigation products sales.

Information Management Services: Segment sales were $156 million, up from $149 million in the year-ago period on the back of aviation-related business growth.

Financial Condition

As of Dec 31, 2015, Rockwell Collins' cash and cash equivalents were $334 million compared with $252 million as of Sep 30, 2015.

Long-term debt (net) was $1,370 million, as of Dec 31, 2015, up from $1,680 million as of Sep 30, 2015.

Cash used for operating activities in first-quarter fiscal 2016 was $91 million, compared to $60 million a year ago.

Fiscal 2016 Guidance

Rockwell Collins expects earnings for fiscal 2016 in the range of $5.45−$5.65 per share, up from the prior guidance of $5.20−$5.40 on total revenue of $5.3−$5.4 billion. Total segment operating margin was reiterated at about 21%.

During the reported quarter, the Federal R&D Tax Credit was permanently reinstated, retroactive to Jan 1, 2015, which led to the acknowledgment of an 18-cent retroactive benefit. Additionally, the company will likely continue to benefit from the Federal R&D Tax Credit throughout fiscal 2016. This was the reason behind the company's raised guidance.

The company expects cash flow from operations between $750−$850 million, up from the prior guidance of $700−$800 million. The company reiterated its guidance for R&D investment of approximately $1 billion and capital expenditure of $200 million.

Our Take

During its fourth-quarter fiscal 2015 earnings call, the company had said that it expects to face near-term challenges in the first half of the 2016. The timing of its Government Systems program was expected to result in declines in the first half but lead to growth in the second half of the year.

Moreover, in Commercial Systems, the production cut on Bombardier Globals was expected to impact the entire year, while growth from new acquisitions was projected to benefit the second half primarily. The company also expected its overall business to continue growing throughout fiscal 2016, and deliver strong margin and cash flow performance.

Peer Releases

Raytheon Company RTN is scheduled to release its fourth-quarter earnings on Jan 28, 2016. The Zacks Consensus Estimate stands at $1.76.

L-3 Communications Holdings Inc. LLL is scheduled to release its fourth-quarter earnings on Jan 28, 2016. The Zacks Consensus Estimate stands at $1.93.

Spirit AeroSystems Holdings, Inc. SPR is scheduled to release its fourth-quarter earnings on Feb 3, 2016. The Zacks Consensus Estimate stands at 97 cents.

Zacks Rank

Rockwell Collins currently has a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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