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Rockwell Collins (COL) Q4 Earnings in Line, Sales Up Y/Y

Rockwell Collins Inc. COL reported results for fourth-quarter fiscal 2017 (ended Sep 30, 2017). The company’s adjusted earnings per share of $1.80 came in line with the Zacks Consensus Estimate. Reported earnings grew 10.4% from $1.63 per share a year ago.

For fiscal 2017, the company reported adjusted earnings of $6.15, which beat the Zacks Consensus Estimate of $6.11 by 0.7%. Full-year earnings increased 7.9% from the year-ago figure of $5.70.

Revenues

In the reported quarter, Rockwell Collins’ total sales was $2,193 million, which missed the Zacks Consensus Estimate of $2,241 million by 2.1%. Revenues however grew 51.8% year over year, driven by higher sales at Interior Systems, Commercial Systems, Government Systems and Information Management Services.

For fiscal 2017, the company reported total sales of $6.82 billion, which also missed the Zacks Consensus Estimate of $6.88 billion by 0.9%. Full-year revenues increased 29.7% from the year-ago figure of $5.26 billion.

Operational Highlights

Total segment operating income during the quarter was $407 million, up 24.8% from $326 million in the year-ago quarter.

Rockwell Collins’ total research and development investment (including the increase in pre-production engineering costs) was $340 million, up 31.3%. The figure represented 15.5% of total quarterly sales compared with 17.9% in the year-ago period.

Interest expense during the quarter was $65 million compared with $16 million in the year-ago quarter.

Segment Performance

Commercial Systems: In the quarter under review, segmental sales of $617 million were up 1.1% year over year primarily owing to higher original equipment and aftermarket sales.

Operating earnings for the quarter were $118 million compared with $130 in the year-ago quarter. However, operating margin contracted 220 bps to 21.9%.

Government Systems: The segment reported sales of $682 million, up 3% on the back of higher communication and navigation revenues.

Operating earnings for the quarter were $163 million, down 3% from $168 million in the year-ago period. Operating margin also contracted 150 bps to 23.9%, primarily driven by higher employee incentive compensation costs.

Information Management Services: Segment sales were $183 million, up from $173 million in the year-ago period backed by growth in aviation related revenues.

Operating earnings for the quarter were $32 million, up from $28 million in the year-ago period. Operating margin was 17.5% compared with 16.2% a year ago. The increase was primarily owing to higher sales volume.

Financial Condition

As of Sep 30, Rockwell Collins’ cash and cash equivalents were $703 million compared with $340 million as of Sep 30, 2016.

Long-term debt (net) was $6,676 million as of Sep 30 up from $1,374 million as of Sep 30, 2016.

Cash used for operating activities at the end of fiscal 2017 was $1,264 million, compared with $723 million a year ago.

Fiscal 2018 Guidance

Considering its pending acquisition by United Technologies Corporation UTX, the company has not provided any financial guidance for fiscal 2018.

Zacks Rank

Rockwell Collins currently carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Peer Release

Raytheon Company RTN reported third-quarter 2017 earnings from continuing operations of $1.97 per share, beating the Zacks Consensus Estimate of $1.90 by 3.7%. The figure also improved 7.1% from $1.84 recorded in the year-ago quarter.

General Dynamics Corporation GD reported third-quarter 2017 earnings from continuing operations of $2.52 per share, beating the Zacks Consensus Estimate of $2.43 by 3.7%. Its third-quarter total revenues of $7,580 million missed the Zacks Consensus Estimate of $7,892 million by 4%.

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