Rockwell Collins [COL] yesterday reported slight declines in net income and sales in its second quarter stemming from a roughed up global commercial aviation sector, which led the company to reduce its financial outlook for the fiscal year.
Net income dipped 2 percent to $164 million, $1.03 earnings per share (EPS), from $168 million ($1.03 EPS) a year ago, topping consensus estimates by a nickel. Sales fell 4 percent to just over $1.1 billion from just under $1.2 billion a year ago with the declines solely due to the commercial aircraft side of the business.
Rockwell Collins was able to boost operating margins nearly a full percent despite the drop in sales, which helped stabilize earnings. Earnings per share were helped by fewer shares of stock outstanding.
For the year the company now expects EPS to be in the range of $3.70 to $3.90, down from earlier projections of $4.10 to $4.30. Sales are forecast to be around $4.5 billion, down $200 million from the previous outlook.
“The combined pressure from a weak global economy, scarcity of aircraft financing, and high levels of used business jet inventories has resulted in dramatic production cuts by business jet manufacturers,” Clay Jones, Rockwell Collins chairman, president and CEO, said in a statement. “Additionally, the weak economy has caused a substantial impact on airlines given the sharp declines they have seen in cargo and premium passenger traffic.”
That weak global economy and the consequences it has for the commercial aviation market drove down revenues at Rockwell Collins’ Commercial Systems segment. The company said sales were down related to reduced business jet production, lingering impacts from Boeing‘s [BA] labor strike, and less aftermarket business.
The company’s Government Systems segment boosted operating earnings by 26 percent on a 6 percent increase in sales. Organic sales accounted for four percent of the jump and were related to the Eurofighter program, the Common Range Integrated Instrumentation System program, Future Combat System and the Joint Precision Approach and Landing System. Segment operating earnings were up on the higher sales and lower employee incentive compensation costs.