Rockwell Collins Gains After Positive Business-Jet Forecast

Rockwell Collins Inc., the aerospace-equipment maker, climbed to the highest since July after projecting corporate-jet production gains this year and posting earnings that topped analysts’ estimates.

The Cedar Rapids, Iowa-based supplier also said it’s doubling the parts it makes for Boeing Co.’s new 787 Dreamliner this quarter, to enough for four planes a month.

The shares gained 5.5 percent to $59.96 at 4:03 p.m. in New York trading, the highest price since July 21.

The company was “able to generally meet expectations for both revenue and profitability,” Chief Executive Officer Clay Jones said in an interview today. “Also the strength of our commercial business and bullishness about business-jet recovery in 2012, and the expressed confidence that once we get through the negative comps, we should see growth in our government business in the second half of the year.”

Business-jet production may increase in 2012 for the first time in three years, Jones said during a conference call on fiscal first-quarter earnings, attributing the gain to improving corporate profitability and small-business activity. Planemakers including Textron Inc.’s Cessna and Bombardier Inc.’s Learjet had cut jobs and production during the recession.

“There’s no subtlety: they’re going up in rate,” Jones said of the manufacturers. He added that while he’s believed a recovery was coming for a long time, “now I can say that more confidently.”

Jobs Plan

Net income fell to $130 million, or 86 cents a share, in the company’s fiscal first quarter from $151 million, or 95 cents, a year earlier. The average estimate from 19 analysts in a Bloomberg survey was 84 cents. The company reduced its share count by more than 4 percent in the period through repurchases.

While earnings showed “grayish numbers,” management had a “rosy tone” on the call, showing a level of confidence that has taken “a decided turn for the better,” Yair Reiner, an analyst with Oppenheimer & Co., wrote in a note.

Rockwell Collins cut about 400 jobs in its defense business since Sept. 1, the beginning of its fiscal year, while adding about the same on the commercial side, Jones said in the interview. The company employs about 20,000.

If the Pentagon cuts more spending this year on programs that affect the company, then Jones said he’ll have to reduce defense employment further. He expects to keep hiring as commercial planemakers boost output of jetliners, so the year will be “net neutral on jobs,” he said, declining to predict how many would be gained and lost.

Firm ‘Outlook’

Still, the defense “outlook remains firm,” Howard Rubel, an analyst in New York with Jefferies & Co., said in a note. The F-15 fighter jets for Saudi Arabia and KC-46 tanker programs are helping offset canceled programs elsewhere, Rubel said, keeping his recommendation that investors hold the shares.

Rockwell Collins, which builds about $3 million of parts for each 787, had kept production at two jets’ worth a month while Boeing burned off inventory during delays to the new model’s entry into service.

As Boeing draws down that inventory, Rockwell Collins’s production will be synchronized with the planemaker’s at four a month going into fiscal year 2013 “and then accelerate from there,” Jones said. The two companies’ manufacturing rates may not match exactly until after Boeing has already reached the 10 a month planned by December 2013, he said.

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