Rockwell Collins Posts 4Q Earnings Beat w/ 13% Govt Sales Bump, Inks $6.4B Deal to Purchase B/E Aerospace

Rockwells Collins logo_GovConWireRockwell Collins (NYSE: COL) reported fourth quarter and full fiscal year 2016 earnings figures above Wall Street’s expectations Sunday as the avionics company embarks on its largest-ever acquisition.

GovCon Index-listed Rockwell Collins said July-September earnings were $1.58 per share versus analyst forecasts of $1.57 while full-year EPS totaled $5.51 to exceed the $5.50 Wall Street outlook.

Total fourth quarter revenue for the Cedar Rapids, Iowa-based company climbed 4.34 percent to $1.45 billion and full-year sales for 12 months ending Sept. 30, 2016 held flat year-over-year at $5.26 billion.

Wall Street analysts expected the company to report $1.48 billion in third quarter revenue and $5.3 billion in full-year sales.

Declines in commercial production rates that included Airbus’ A330 affected avionics equipment sales, Rockwell Collins said.

Fourth quarter revenue in the company’s government systems segment rose 13.94 percent to $662 million on higher fixed-wing platform, simulation and training program sales.

Government system revenue for the full 2016 fiscal year climbed 0.86 percent to $2.2 billion and represent approximately 41.95 percent of overall company sales at roughly the same ratio in FY 2015.

Net income for the July-September period increased 13.04 percent to $208 million and full-year profit rose 6.12 percent to $728 million.

Rockwell Collins disclosed fiscal year 2016 results Sunday with an additional announcement that the avionics company will buy airline cabin equipment supplier B/E Aerospace (Nasdaq: BEAV) for approximately $6.4 billion cash-and-stock, or $62 per share.

The deal’s value comprises $34.10 per share in cash and $27.90 in shares of Rockwell Collins’ stock to represent a 23-percent premium over B/E’s $50.61 closing price Friday.

Rockwell Collins expects to close the deal in Spring 2017 and the combined company to have on a pro-forma basis 30, 000 employees, $8.1 billion in revenues and $1.9 billion in earnings before tax, debt, taxes and amortization for the 12 months ending Sept. 30, 2016.

Excluding B/E Aerospace results, Rockwell Collins expects to record $5.3 billion-$5.4 billion in revenue for its 2017 fiscal year that started Oct. 1 with assumptions that government systems segment sales will grow low-to-mid single digits, commercial will hold flat and information management services will climb mid-to-high single digits.

B/E Aerospace shareholders will own approximately 20 percent of the combined company.

As of Friday’s close, shares in Rockwell Collins have declined 8.49 percent since the start of the year and are unchanged over 12 months.

By comparison, the GovCon Index has risen 5.11 percent on a year-to-date basis and is up 6.27 percent for 52 weeks.

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