Rockwell Collins [COL] on Thursday posted lower net income despite a rise in sales as higher taxes more than wiped out a gain in operating earnings.
Net income slipped 8 percent to $148 million, $1.08 earnings per share (EPS), from $161 million ($1.17 EPS), due to the expiration of the federal research and development tax credit in December 2013, which added $31 million (22 cents EPS) to the results a year ago, and higher interest expense. Excluding $1 million in income from discontinued operations, per share earnings were $1.07, in line with consensus estimates.
At the segment level, Rockwell Collins’ posted an 11 percent gain in operating earnings to $254 million, driven by the new Information Management Services business, which added $17 million to the total from a year ago due to the acquisition in December of ARINC. Earnings in the Commercial Systems business were up 9 percent to $127 million on higher volume, lower R&D spending, and cost cutting while the Government Systems business saw a 3 percent drop to $109 million on lower sales.
Segment operating margins were 20 percent.
Sales were up 12 percent in the quarter to $1.3 billion from $1.1 billion largely due to the ARINC purchase, although the commercial business also contributed with a 3 percent bump that slightly more than offset a 2 percent dip in the government business. Commercial sales were up on higher hardware delivery rates for
Boeing’s [BA] 787 aircraft program and aftermarket business while the government business was down due to fewer satellite communications terminals and decreased services related to the drawdown of United States forces in the Middle East.
For the year, Rockwell Collins raised its earnings guidance by a nickel to between $4.40 to $4.55 EPS to account for lower than previously estimated intangibles amortization for ARINC. Sales are still forecast in the $5 billion to $5.1 billion range.
Rockwell Collins repurchased 500,000 shares of its stock in the quarter for $39 million and still has $356 million remaining on its repurchase authorization.