Rockwell Collins revises outlook downward for FY2009, EADS down 5% – Suppliers Share Wrap

Rockwell Collins issued a revised outlook for FY2009 and FY2010, lowering and narrowing its forecasts for earnings per share this year from USD3.70-USD3.90 to USD3.70-USD3.75, and cutting its revenue forecast by approximately USD50 million to USD4.5 billion.

Total operating margins have been raised slightly, to between 21% to 21.5% (updated from about 21% under the previous forecast). The company forecasts FY2010 revenue of USD4.6 billion to USD4.8 billion, and earnings per share of USD3.35 to USD3.55 (USD3.80-USD4.00 excluding exceptional items). Cash flow from operations of USD600 million to USD700 million, with operating margins of 18.5% to 19.5%.

Commercial Systems revenue is expected to decline 7% in 2010. Rockwell Collins forecasts a “low double-digit decline” in sales related to aircraft original equipment manufacturers, with greater declines in the first half of the year and moderating declines in the second half, due to higher production rates in FY2010 as compared to FY2009 due to the Boeing labor strike. It also expects low single-digit growth in aftermarket sales, with declines in the first half of the year offset by growth in the second half. The company also forecasts 40% decline in sales related to IFE products and systems for widebody aircraft.

Government Systems revenue is expected to increase by approximately 12%, with around half from organic growth and half from the recently acquisition of DataPath.

Rockwell Collins expects to invest USD870-900 million in R&D costs, and approximately USD135 million in capital costs. Shares in the company were down 0.8% on Monday.

EADS sharply lower

EADS shares lost 5.0% on Monday, despite Morgan Stanley upgrading the manufacturer from ‘equalweight’ to ‘overweight’, citing long-term airline capacity intentions of airlines and renewed confidence in aerospace companies that the worst of the economic crisis is over.

US lawmakers have continued to lobby the Obama Administration to exclude the EADS/Northrop Grumman entry from the USD35 billion US aerial refueling contract, due to be reopened in the next few weeks.

Selected Aviation suppliers’ daily share price movements (% change): 21-Sep-09