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Will Government Systems Aid Rockwell (COL) in Q4 Earnings?

Aviation electronics maker, Rockwell Collins Inc. COL, is slated to report fourth-quarter fiscal 2017 results on Oct 27, before the opening bell.

We expect the company’s Government Systems business unit to primarily drive the its revenues in the quarter. Also, its approval of additional stock repurchase reflects a strong cash flow result for the quarter.

Let’s take a detailed look at the factors influencing Rockwell Collins' quarterly results.

Government Systems Unit – A Key Catalyst

During the fiscal third-quarter earnings call, management stated that Rockwell Collins has witnessed positive sales and backlog growth in its Government Systems unit, on a year-over-year basis. Looking ahead, the company anticipated this unit to reflect strong results in the next quarter and achieve targeted sales growth in this segment.

In line with this, the Zacks Consensus Estimate for third-quarter sales stands at $677 million for the segment, reflecting year-over-year growth of 2.3%.

Rockwell Collins, Inc. Price and EPS Surprise

 

Rockwell Collins, Inc. Price and EPS Surprise | Rockwell Collins, Inc. Quote

Other Factors at Play

Rockwell Collins expects its third quarter operating margins to be impacted by increased company-funded research and development expenditures due to higher spending on the Boeing 777X program and the newly announced Airbus FOMAX program..

On the brighter note, during the quarter, Rockwell Collins announced that its board of directors has approved the repurchase of additional $200 million of the company’s common stock. This, in turn, is expected to reflect strong quarterly cash flow results for Rockwell Collins.   .

For the quarter, our Consensus Estimate for earnings reflects a 13.6% year-over-year growth. Meanwhile, revenues are estimated to be $2.24 billion, implying a 55.1% growth year over year.

Earnings Whispers

Our proven model shows that Rockwell Collins will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen and Rockwell Collins has the perfect mix.

Zacks ESP: Rockwell Collins has an Earnings ESP of +2.23%. This is because the Most Accurate estimate is pegged at $1.84, higher than the Zacks Consensus Estimate of $1.80. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Rockwell Collins carries a Zacks Rank #2, which along with a positive earnings ESP hints at possible surprise prediction.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrants a Look

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Raytheon Company RTN is slated to report third-quarter 2017 results on Oct 26. The company has an Earnings ESP of +0.05% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here..

Spirit Aerosystems Holdings, Inc. SPR is expected to report third-quarter 2017 results on Nov 7. The company has an Earnings ESP of +0.69% and a Zacks Rank #2.

Aerojet Rocketdyne Holdings, Inc. AJRD is expected to report third-quarter 2017 results on Nov 7. The company has an Earnings ESP of +15.39% and a Zacks Rank #3.

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Rockwell Collins, Inc. (COL): Free Stock Analysis Report
 
Spirit Aerosystems Holdings, Inc. (SPR): Free Stock Analysis Report
 
Aerojet Rocketdyne Holdings, Inc. (AJRD): Free Stock Analysis Report
 
Raytheon Company (RTN): Free Stock Analysis Report
 
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