Rockwell Collins (ROL) Named Top 3 Pick at Cowen

Off 9% vs. S&P 500 since mid-April, Rockwell Collins (NYSE: COL) offers extended visibility of accelerating sales, EPS, & CFPS with government/aftermarket sales a defensive 60% of total and a superior 20%+ ROIC, Cowen analyst Cai von Rumohr said. They are moving it into their top 3 picks for a PT of $100.

COL's 8K indicates Q1's restructuring charge will be $35-45MM or 18-24¢ vs. a previously indicated 10-15¢ since a greater than expected number of employees opted for voluntary early retirement. Longer term, this will result in cost savings but today, analysts are adjusting their models to compensate for the expense shift.

von Rumohr updated his model today to look for Q1 EPS of 89¢ vs. a prior 95¢ although he has not changed the full year estimate since restructuring savings over are expected to at least offset Q1's charge. FY15 is also adjusted to assume that the 36¢ tax plus from the Data Path sale will occur in Q3 with tax rates in all other Q's near 33% and the year still at 28%. This excludes an R&D tax credit for 2015, which would add 20-25¢, all in Q1, or an R&D tax credit for 2016, which would add 5-6¢ in each of the last three quarters.

Cowen expects FY16 organic sales growth of 1-2% given lower bizjet & flattish government sales; buta lift to 5% in FY17 and 6% in FY18. Margins also should trend up in FY17-18 with acceleration in EPS to 10% in FY17 and 12% in FY18.

For an analyst ratings summary and ratings history on Rockwell Collins click here. For more ratings news on Rockwell Collins click here.

Shares of Rockwell Collins closed at $84.81 yesterday.

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