Rockwell Collins Inc LONG
Long from $135.99
Market cap - 22.4B
Beta - 0.70
P/B – 3.52
Short interest – 4,587,624
VWAP - $136.51
Debt/ Equity – 1.02
Earnings yield 5.3% vs Industry average 4.63%
- In the past year share price of Rockwell Collins has outperformed the industry. In the past year, shares have gained 40.11% against the broader industries gain of 32.6%. WTD the company is up 0.50%.
- The company is in a very niche market and is the main global supplier of avionics and communications equipment for both commercial and military customers. Rockwell’s exposure to both markets allows it to use government funding to develop products for both markets. Having the two markets leads to higher volume sales which goes on to create economies of scale in cost-sensitive government contracts whilst at the same time they obtain numerous contracts though not as big as the government contracts they still generate decent revenues for the company.
- Rockwell follows a very strategic acquisition programme – in April 2017 the company acquired E/E aerospace for a total value of 8.6Bn. This acquisition massively boosted the sales of Rockwell Collins equipment which serves the bigger two aisle planes of Airbus Group and Boeing which dominate the aviation industry. Outstandingly, the company’s total sale for fiscal year 2017 improved by 30% YoY, mainly on the back of this buy out. In addition to this, it is operating cash flows during 2017 saw a 75% increase over 2016 and a 93% higher annual free cash flow due to operating cash flow from the acquisition of B/E aerospace. Furthermore, on this very beneficial acquisition the deal is expected to generate pre-tax cost energy of around 125M. Management anticipates to attain 90% of the cost synergies by the end of fiscal year 2019. This fiscal year, the buy-out is projected to create a double digit increment to the company’s earnings.
- Rockwell has a large focus on R&D, which enables them to seal advantageous deals. Under its R&D programme the company invested 305M, representing a tremendous 45.2% annual growth. In addition to this, in fiscal year 2017 it achieved its target to invest 1.1Bn. This spending will extremely benefit the company to develop top quality and technically advanced products. The R&D expenses include both customer funded and company funded expenditures and development expenditures were assigned on the Bombardier Global 7000/8000, the Boeing 737 MAX platform and certain military transport programmes in fiscal year 2017. These resulted in a net increase of 35M to Rockwell Collins Investment in pre-production engineering programmes which hold a colossal market value.
- As of 31st December 2017, cash and cash equivalents were 583M and the company paid dividends were worth
54M during fiscal first quarter up from the previous year first quarter figure of 43M. the improving liquidity position enables Rockwell to seek several investor friendly practices including a payment of a regular dividend and a share buy-back programme. Rockwell continues to spotlight its plan to maintain a dividend pay-out ratio of approximately a quarter of net income.
- Rockwell remains in an agreement to be acquired by United Technology Corporations (UTX – a DJIA stock) for 30Bn. The value of the deal reflects the total equity value of 23Bn and the company’s net debt. Shareholders of Rockwell will be given all – cash consideration of $140 per share reflecting a premium of 2.4% from the current share price. The transaction is expected to be completed by 4Q18.
Chart wise, we can see a consolidation area where the share price is currently trading. We expect to see some strong buying as we get closer to the UTX acquisition of NYSE:COL and a strong move upwards as we break out of this consolidation/high volume area to possibly further all time highs.
NeroTree Capital rates Rockwell Collins Inc as a BUY with a price target of $145 over the next 52w.
Market cap - 22.4B
Beta - 0.70
P/B – 3.52
Short interest – 4,587,624
VWAP - $136.51
Debt/ Equity – 1.02
Earnings yield 5.3% vs Industry average 4.63%
- In the past year share price of Rockwell Collins has outperformed the industry. In the past year, shares have gained 40.11% against the broader industries gain of 32.6%. WTD the company is up 0.50%.
- The company is in a very niche market and is the main global supplier of avionics and communications equipment for both commercial and military customers. Rockwell’s exposure to both markets allows it to use government funding to develop products for both markets. Having the two markets leads to higher volume sales which goes on to create economies of scale in cost-sensitive government contracts whilst at the same time they obtain numerous contracts though not as big as the government contracts they still generate decent revenues for the company.
- Rockwell follows a very strategic acquisition programme – in April 2017 the company acquired E/E aerospace for a total value of 8.6Bn. This acquisition massively boosted the sales of Rockwell Collins equipment which serves the bigger two aisle planes of Airbus Group and Boeing which dominate the aviation industry. Outstandingly, the company’s total sale for fiscal year 2017 improved by 30% YoY, mainly on the back of this buy out. In addition to this, it is operating cash flows during 2017 saw a 75% increase over 2016 and a 93% higher annual free cash flow due to operating cash flow from the acquisition of B/E aerospace. Furthermore, on this very beneficial acquisition the deal is expected to generate pre-tax cost energy of around 125M. Management anticipates to attain 90% of the cost synergies by the end of fiscal year 2019. This fiscal year, the buy-out is projected to create a double digit increment to the company’s earnings.
- Rockwell has a large focus on R&D, which enables them to seal advantageous deals. Under its R&D programme the company invested 305M, representing a tremendous 45.2% annual growth. In addition to this, in fiscal year 2017 it achieved its target to invest 1.1Bn. This spending will extremely benefit the company to develop top quality and technically advanced products. The R&D expenses include both customer funded and company funded expenditures and development expenditures were assigned on the Bombardier Global 7000/8000, the Boeing 737 MAX platform and certain military transport programmes in fiscal year 2017. These resulted in a net increase of 35M to Rockwell Collins Investment in pre-production engineering programmes which hold a colossal market value.
- As of 31st December 2017, cash and cash equivalents were 583M and the company paid dividends were worth
54M during fiscal first quarter up from the previous year first quarter figure of 43M. the improving liquidity position enables Rockwell to seek several investor friendly practices including a payment of a regular dividend and a share buy-back programme. Rockwell continues to spotlight its plan to maintain a dividend pay-out ratio of approximately a quarter of net income. - Rockwell remains in an agreement to be acquired by United Technology Corporations (UTX – a DJIA stock) for 30Bn. The value of the deal reflects the total equity value of 23Bn and the company’s net debt. Shareholders of Rockwell will be given all – cash consideration of $140 per share reflecting a premium of 2.4% from the current share price. The transaction is expected to be completed by 4Q18.
Chart wise, we can see a consolidation area where the share price is currently trading. We expect to see some strong buying as we get closer to the UTX acquisition of NYSE:COL and a strong move upwards as we break out of this consolidation/high volume area to possibly further all time highs.
NeroTree Capital rates Rockwell Collins Inc as a BUY with a price target of $145 over the next 52w.
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