Yahoo Finance Will Rockwell Collins (COL) Keep Its Earnings Streak Alive? - Analyst Blog
Rockwell Collins Inc. (COL) is set to release its first-quarter fiscal 2015 results before the opening bell on Friday, Jan 23. We expect the company to beat expectations when it reports its results on the day.
In the preceding quarter, Rockwell Collins delivered a positive 3.17% earnings surprise. Also, the company maintained an average positive earnings surprise of 1.5% over the past four quarters.
Let us see how things are shaping up prior to this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Rockwell Collins is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +2.70%. This is because the Most Accurate estimate stands at $1.14 per share and the Zacks Consensus Estimate is pegged lower at $1.11. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: The company currently has a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), #2 or #3 (Hold) have a significantly higher chance of beating earnings.
Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Rockwell Collins’ Zacks Rank #2 and +2.70% ESP makes us confident of an earnings beat.
What is driving the Better-than-Expected Earnings?
Rockwell Collins caters to both commercial and military customers. The company’s balanced exposure to both types of customers leads to higher sales in spite of low funding and cost-sensitive government contracts. Recently, in Dec 2014, Rockwell Collins received a four-year contract worth $420 million from the Naval Air Systems Command to continue providing the ARC-210 advanced airborne software defined radio system. Previously in Oct 2014, it had received a $101.1 million contract from the U.S. Navy to procure AN/ARC-210 electronic protection radio equipment.
It is also committed to enhance the quality of its product offerings through investments in research and development (“R&D”). Rockwell Collins’ next-generation information management, communications, navigation and landing system debuted on the latest Airbus A350 XWB (“Xtra-Wide Body”) recently. The company invested $934 million in fiscal 2014 in R&D and intends to invest $950 million in fiscal 2015.
Regular contract wins and focus on innovations will boost the company’s prospects, going forward.
Other Stocks to Consider
Rockwell Collins is not the only firm looking up this earnings season. We also see likely earnings beat coming from these industry peers:
Spirit AeroSystems Holdings, Inc. (SPR) has an Earnings ESP of +7.79% and carries a Zacks Rank #1.
Textron Inc. (TXT) has an Earnings ESP of +12.16% and carries a Zacks Rank #2.
The Boeing Company (BA) has an Earnings ESP of +1.44% and carries a Zacks Rank #2.
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