Rockwell (COL) Hits 52-Week High On Raised Repurchase Plan

Shares of Rockwell Collins, Inc. (NYSE:COL) , supplier of communications and avionics equipment, has touched a new 52-week high of $110.00 on Jul 13, before closing a tad lower at $109.07. The stock has delivered a one-year return of about 29%, outperforming the Zacks categorized Aerospace - Defense Equipment industry’s gain of 24.2%.

In the past 52 weeks, Rockwell Collins’ share price has ranged from a low of $78.54 to a high of $110. Average volume of shares traded in the last three months is approximately 1.54 million. The stock also has a market cap of 17.71 billion.

Factors behind the Performance

Rockwell Collins’ shares have been on the rise following strong second-quarter fiscal 2017 (ended Mar 31, 2017) results which were declared on Apr 21. Notably, the company’s adjusted earnings per share surpassed the Zacks Consensus Estimate by 2.3%. Reported earnings also improved 3.1% from the year-ago quarter’s comparable figure.

Around the same time, the company completed its B/E Aerospace acquisition for $8.6 billion. Apart from boosting annual revenue outlook for 2017 by more than $8 billion on a year-over-year basis, this buyout led Rockwell Collins to hike its free cash flow guidance for fiscal 2017 by $50 million. Naturally the acquisition raised investors’ optimism on the company’s growth potential.

Recently, Rockwell Collins’ management increased its share repurchase authorization by $200 million, for the balance of fiscal year 2017 in to 2018. This is an addition to the company’s previous repurchase agreement announcement in Oct 2016 and brought the total amount of the repurchase program to approximately $285 million.

Consequently, the news buoyed investor sentiments and was clearly evident in the shares rally that eventually hit the highest point yesterday.

Moreover, Rockwell Collins pays regular dividend to shareholders, which in turn reflects strong cash balance position. At present, the company’s annual dividend rate is $1.32, displaying a dividend yield of 1.24%. Going forward, it plans to maintain a dividend payout ratio of approximately 25% of net income.

The company also has been a consistent performer in terms of earnings, having delivered positive earnings surprises in the trailing four quarters with an average surprise of 2.45%. The long-term earnings growth of the company is presently pegged at 11.7%.

Further, estimate revision trend for this company has been favorable for the current year. In the last 90 days, the consensus estimate has increased around 10.9% to $6.02 per share.

Going ahead, we expect that the company’s focus on research & development and systematic investments in inorganic growth programs along with shareholder friendly moves will boost future performance, in a similar manner.

Zacks Rank and Key Picks

Rockwell Collins currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Curtiss-Wright Corporation (NYSE:CW) and KLX Inc. (NASDAQ:KLXI) , both sporting a Zacks Rank #1 (Strong Buy) and Transdigm Group Incorporated (NYSE:TDG) which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Curtiss-Wright delivered a positive earnings surprise in the last four quarters with an average surprise of 5.11%. Its 2017 Zacks Consensus Estimate moved up nearly 2.7% to $4.49 per share in the last 90 days.

KLX delivered an average surprise of 18.67% in the trailing four quarters. Its 2017 estimates have risen by 90.7% to $3.09 per share in the last 90 days.

Transdigm Group delivered a positive earnings surprise in the preceding four quarters with an average surprise of 3.74%. Its 2017 Zacks Consensus Estimate moved up nearly 1.39% to $11.64 per share in the last 90 days.

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