Rockwell Collins Falls as Defense Cuts Crimp 2014 ForecastJulie Johnsson
Rockwell Collins Inc. fell the most in more than two years after the maker of aircraft electronics forecast profit and sales that trailed analysts’ estimates as U.S. military spending shrinks.
The shares slid 5.8 percent to $70 at the close in New York, after the company said the cuts would crimp results for the period ending Sept. 30, 2014. It was the stock’s biggest one-day decline since August 2011 and trading volume was about three times the 12-month daily average.
Rockwell, which provides avionics, communication and navigation products to the U.S. Department of Defense, state and local governments, said that sequestration, or the automatic budget cuts triggered Oct. 1, will weigh on earnings for the period. The Cedar Rapids, Iowa-based Rockwell Collins expects 2014 to be “the bottom for this defense cycle,” Chief Executive Officer Kelly Ortberg said in a statement.
Earnings per share will be in a range of $4.30 to $4.50 in fiscal 2014, while revenue will be $4.5 billion to $4.6 billion, Rockwell Collins said in the statement. Analysts had estimated profit of $4.84 on sales of $4.93 billion, according to data compiled by Bloomberg.
The company forecast annual commercial-systems revenue to increase by “mid-single digits,” driven by production of Boeing’s 787 Dreamliner, or as much as 7 percent, Howard Rubel, an aerospace analyst with Jefferies LLC, said in a note. He rates the shares hold.
The forecast excluded the company’s $1.39 billion takeover of Arinc Inc., which provides air-to-ground communications and will be its biggest acquisition when it closes later this year.
“Exposure to aerospace growth should be boosted by the soon-to-close Arinc deal,” Robert Stallard, a New York-based aerospace analyst with RBC Capital Markets, wrote in a note to clients. He recommends buying the stock.