Rockwell Collins second-quarter earnings flat, sales slip 3%

Rockwell Collins on Friday reported flat second-quarter earnings and sales that were 3 percent below a year ago.

The Cedar Rapids avionics and communications supplier posted net income of $161 million, or $1.17 per share, for the three months that ended on March 31, compared with $161 million, or $1.09 per share, in the second quarter of fiscal year 2012.

The 7 percent increase in earnings per share was due to the favorable effect of the company's share repurchase program.

Rockwell Collins reported sales of $1.13 billion in the second quarter of fiscal 2013, down from $1.16 billion in the same quarter of fiscal 2012.

Government Systems division sales slid 8 percent, to $578 million, in the most recent quarter as avionics and communication product sales declined along with surface solutions sales. Navigation product sales declined due to fewer deliveries of Defense Advanced GPS Receiver products.

Commercial Systems division sales increased 4 percent, to $553 million, as sales to aircraft original equipment manufacturers increased from higher deliveries for the Boeing 787 and 737, and the Bombardier Global and Challenger aircraft. Aftermarket sales also increased from higher business jet retrofits, partially offset by lower air transport service and support and higher spares sales last year.

Clay Jones, Rockwell Collins chairman and CEO, said the second-quarter results were in line with expectations.

"When we think about the turbulence surrounding the defense market and a lot of moving parts in our commercial market with a weaker aftermarket in the services and support area, weakness in light business jets and lagging recovery, we're actually very pleased with coming in line," Jones said.

"We had strength in other parts of our business that really took up the slack. I think that really speaks to the balance and diversity that we've built into our company that we can absorb a few of these softer market conditions and still deliver the results our shareholders expected."

Earlier this week, aircraft maker and Rockwell Collins customer Textron lowered its full year earnings forecast on expected lower demand for commercial jets. Jones said Textron has been reducing orders of Rockwell Collins equipment for its Cessna aircraft, an early indication that it is slowing d0wn production.

"I would guess that we would see some additional slowing as a result of the market conditions described by Textron," Jones said. "Putting that in context, we have one point of commercial growth. That's about $23 million if they were to stop it this afternoon, and we don't think that they will.

"I believe we still have enough flexibility in the guidance that we've given to compensate for whatever Cessna might do between now and the end of the year."

Jones said he still expects Commercial Systems sales to grow by 8 percent in the second half of fiscal 2013. He cited across the board increases in sales, including a lot of existing aircraft retrofits with new equipment.

"That's going to be one of the biggest growth rates that we will have in the second half," Jones said. "Hopefully, that will bridge us from fiscal 2013 into fiscal 2014 to keep the momentum going."

Looking at the remainder of fiscal 2013, Rockwell Collins is forecasting earnings per share of $4.45 to $4.65 on sales of $4.6 billion to $4.7 billion. The company expects to invest $950 million on research and development, down from an earlier projection of $1 billion.

Rockwell Collins also announced Friday morning that Jones would retire as CEO as of July 31, but will stay on as non-executive chairman.