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Rockwell Collins (COL) Q1 Earnings: Stock to Disappoint?
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Aviation electronics maker Rockwell Collins Inc. is slated to report first-quarter fiscal 2017 results on Jan 20, before the opening bell. In the last reported quarter, the company recorded a positive earnings surprise of 0.64%. Moreover, the company beat earnings estimates in all of the trailing four quarters with an average positive surprise of 6.85%.
Let’s see how things are shaping up for this announcement.
Factors at Play
During the fiscal first quarter, Rockwell Collins entered into a definitive agreement to acquire B/E Aerospace Inc. The transaction is expected to close in 2017. Upon completion, Rockwell Collins is projected to hold a strong investment grade credit rating with net debt of around $7.5 billion. In the first fiscal year of its completion, the deal is expected to lead to double-digit accretion to the company’s earnings. Combined five-year free cash flow generation is expected to exceed $6 billion.
Again, during the fiscal quarter, the Federal Aviation Administration (FAA) renewed its Aeronautical Mobile Communications Service (AMCS) agreement with Rockwell Collins. Under the agreement, the company will continue to facilitate Air Traffic Control (ATC) communications, including position reports, aircraft requests and ATC clearances, between the FAA and planes flying in the U.S. oceanic airspace. This will likely contribute to the company’s long-term growth plan.
In the defense arena, Trump’s victory in the Presidential race may turn out to be a growth catalyst for Rockwell Collins and other defense majors. During his pre-electoral campaign, Trump had made promises of an increase in defense spending and expansion of troops. Moreover, a quick review of the past reveals that the Conservative Republican Party has usually been in favor of higher military spending.
However, its fiscal first-quarter estimates have witnessed two downward revisions in the last 60 days. For the quarter, the Zacks Consensus Estimate for earnings stands at $1.14, reflecting a 6.2% year-over-year decline. Revenues, on the other hand, are estimated to be $1.20 billion, translating into 3.1% year-over-year growth.
Our proven model does not conclusively show that Rockwell Collins is likely to 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. This is not the case here, as you will see below:
Zacks ESP: Rockwell Collins has an Earnings ESP 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.14.
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 #4 (Sell). As it is, we caution against Sell-rated stocks (Zacks Rank #4 or #5) going into the earnings announcement.
Price Movement
Rockwell Collins’ stock has gained about 3.9% in the last six months, underperforming the Zacks categorized Aerospace-Defense Equipment industry’s gain of 8.2%. This is probably due to tough competition faced by the company, its exposure to fixed-price contract as well as vulnerability to foreign currency fluctuations.
Stocks that Warrants a Look
Unlike Rockwell Collins, we see likely earnings beat coming from these industry peers in the to-be-reported quarter:
L3 Technologies, Inc. is scheduled to report fourth-quarter 2016 results on Jan 26. The company has an Earnings ESP of +2.36% and a Zacks Rank #3.
Raytheon Company is expected to report fourth-quarter 2016 results on Jan 26. The company has an Earnings ESP of +2.15% and a Zacks Rank #2.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Rockwell Collins (COL) Q1 Earnings: Stock to Disappoint?
Aviation electronics maker Rockwell Collins Inc. is slated to report first-quarter fiscal 2017 results on Jan 20, before the opening bell. In the last reported quarter, the company recorded a positive earnings surprise of 0.64%. Moreover, the company beat earnings estimates in all of the trailing four quarters with an average positive surprise of 6.85%.
Let’s see how things are shaping up for this announcement.
Factors at Play
During the fiscal first quarter, Rockwell Collins entered into a definitive agreement to acquire B/E Aerospace Inc. The transaction is expected to close in 2017. Upon completion, Rockwell Collins is projected to hold a strong investment grade credit rating with net debt of around $7.5 billion. In the first fiscal year of its completion, the deal is expected to lead to double-digit accretion to the company’s earnings. Combined five-year free cash flow generation is expected to exceed $6 billion.
Again, during the fiscal quarter, the Federal Aviation Administration (FAA) renewed its Aeronautical Mobile Communications Service (AMCS) agreement with Rockwell Collins. Under the agreement, the company will continue to facilitate Air Traffic Control (ATC) communications, including position reports, aircraft requests and ATC clearances, between the FAA and planes flying in the U.S. oceanic airspace. This will likely contribute to the company’s long-term growth plan.
In the defense arena, Trump’s victory in the Presidential race may turn out to be a growth catalyst for Rockwell Collins and other defense majors. During his pre-electoral campaign, Trump had made promises of an increase in defense spending and expansion of troops. Moreover, a quick review of the past reveals that the Conservative Republican Party has usually been in favor of higher military spending.
However, its fiscal first-quarter estimates have witnessed two downward revisions in the last 60 days. For the quarter, the Zacks Consensus Estimate for earnings stands at $1.14, reflecting a 6.2% year-over-year decline. Revenues, on the other hand, are estimated to be $1.20 billion, translating into 3.1% year-over-year growth.
Rockwell Collins Inc. Price and EPS Surprise
Rockwell Collins Inc. Price and EPS Surprise | Rockwell Collins Inc. Quote
Earnings Whispers
Our proven model does not conclusively show that Rockwell Collins is likely to 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. This is not the case here, as you will see below:
Zacks ESP: Rockwell Collins has an Earnings ESP 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.14.
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 #4 (Sell). As it is, we caution against Sell-rated stocks (Zacks Rank #4 or #5) going into the earnings announcement.
Price Movement
Rockwell Collins’ stock has gained about 3.9% in the last six months, underperforming the Zacks categorized Aerospace-Defense Equipment industry’s gain of 8.2%. This is probably due to tough competition faced by the company, its exposure to fixed-price contract as well as vulnerability to foreign currency fluctuations.
Stocks that Warrants a Look
Unlike Rockwell Collins, we see likely earnings beat coming from these industry peers in the to-be-reported quarter:
Huntington Ingalls Industries, Inc. (HII - Free Report) is expected to report fourth-quarter 2016 results on Feb 16. The company has an Earnings ESP of +2.82% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
L3 Technologies, Inc. is scheduled to report fourth-quarter 2016 results on Jan 26. The company has an Earnings ESP of +2.36% and a Zacks Rank #3.
Raytheon Company is expected to report fourth-quarter 2016 results on Jan 26. The company has an Earnings ESP of +2.15% and a Zacks Rank #2.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>