Rockwell Collins Rises on FY2015 View, Boosts Buyback Plan - Analyst Blog

A leading global supplier of communications and avionics equipment for both commercial and military customers, Rockwell Collins Inc.'s (COL) shares rose 2.74% on Sep 19, 2014 following the announcement of its fiscal 2015 guidance as well as on its expanded share buyback plan. This marked the biggest gain for the company in more than two years.

The company, which makes aircraft electronics, expects total revenues in the range of $5.2 billion to $5.3 billion and earnings per share of $4.90 to $5.10 for fiscal 2015. The Zacks Consensus Estimate for revenues and earnings is currently at $5.24 billion and $4.95, respectively.

On a segment-wise basis, revenues for fiscal 2015 are expected to increase in the high single digits at Commercial Systems, to remain flat at Government Systems and see double-digit growth at Information Management Services or IMS when compared with fiscal 2014.

The company expects combined segment operating margins in the range of 20.5% to 21.5%. IMS will likely see margin expansion of over 100 basis points (bps), 50-100 bps at Commercial Systems and 21% at Government Systems.

For fiscal 2014, Rockwell Collins reiterated its view with earnings per share expected in the band of $4.45 to $4.55 on revenues of approximately $4.90 billion to $4.95 billion.

Rockwell Collins is committed to maintaining a stable liquidity position. Cash flow from operations is expected between $675 million and $775 million for fiscal 2015. The company reiterated its guidance for cash flow from operations in the range of $600 million to $700 million for fiscal 2014.

A stable liquidity position enables Rockwell Collins to pursue several investor-friendly moves, including share buybacks and payment of regular dividends. Rockwell Collins announced that its board has approved an additional $500 million to expand the company's share repurchase program.

Rockwell Collins' balanced exposure to both defense and commercial markets allows it to use government funding to develop products for the dual-end market. This leads to higher volume sales, which create economies of scale in cost-sensitive government contracts.

The company retains a Zacks Rank #3 (Hold). Some better-ranked stocks in the defiance space include Ducommun Inc. (DCO), B/E Aerospace Inc. (BEAV) and Curtiss-Wright Corporation (CW). Ducommun carries a Zacks Rank #1 (Strong Buy), while B/E Aerospace and Curtiss-Wright hold a Zacks Rank #2 (Buy).