Rockwell Collins Inc. COL is set to release its second-quarter fiscal 2015 results before the opening bell on Apr 23, 2015.
In the preceding three-month period, Rockwell delivered a negative 1.79% earnings surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Rockwell Collins is the foremost global supplier of communications and avionics equipment for both commercial and military customers. The company’s balanced exposure to both types of customers 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 is known to opt for an inorganic growth strategy. Apart from its significant ARINC Inc. acquisition, the company expanded its Information Management Services portfolio by adding Pacific Avionics in Mar 2015. Pacific Avionics is a Singapore-based company which specializes in developing technologies for wireless information distribution inclusive of in-flight entertainment and connectivity. The integration of Pacific Avionics’ solid platform for Internet connectivity services with Rockwell Collins’ cabin products will offer customers numerous advanced services.
Rockwell Collins also does not neglect research and development enabling it to clinch lucrative deals to keep its top line ticking. During the quarter, Rockwell Collins collaborated with OneWeb Ltd. to become the exclusive supplier of satellite communication (“SATCOM”) terminals for the latter’s global aviation high-speed broadband service. Additionally, it will serve as an official Value Added Reseller of OneWeb’s service.
However, dependence on international sales, delays in funding authorizations by the U.S. government and higher exposure to fixed-price contracts raise concerns.
Earnings Whispers?
Our proven model does not conclusively show that Rockwell Collins is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: This is because the Most Accurate estimate stands at $1.36, while the Zacks Consensus is higher at $1.40. This results in an ESP of -1.64%.
Zacks Rank: Rockwell Collins carries a Zacks Rank #2, which when combined with a negative ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:
Huntington Ingalls Industries, Inc. HII with an Earnings ESP of +2.91% and a Zacks Rank #1.
Raytheon Co. RTN with an Earnings ESP of +12.50% and a Zacks Rank #3.
Northrop Grumman Corp. NOC with an Earnings ESP of +1.33% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment