Wednesday, November 16, 2011

Rockwell Collins (COL) 2011 Review

Rockwell Collins (COL) designs manufacturers and supports aviation electronics and mobile and airborne communication systems, navigation, display and automatic flight control systems to multinational corporations and defense and electronic system products for airborne, ground and shipboard applications for domestic government agencies.

The company has grown earnings and dividends 16-18% annually over the last five years while earning a 30%+ return on equity. Despite the impact of the economic malaise on the airline and private aircraft industries, earnings are resuming their long term growth rate due to:

(1) strong demand from the commercial aircraft industry,

(2) margin expansion,

(3) aftermarket sales are ramping up strongly.

The major negative for COL is the lagging sales from the government as a result of budget constraints.

COL is rated A+ by Value Line, has a debt to equity ratio of 24% and its stock yields 2.1%

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2001
COL 2.1% 5% 22% 8*
IND 1.3 7** 21 NA

Debt/Equity ROE EPS Down Since 2001 Net Margin Value Line Rating
COL 24% 31% 2 13% A+
IND 32 18 NA 9 NA

*COL has paid a dividend for only 9 years
** the majority of companies in COL industry do not pay a dividend


Note: COL stock made good initial progress off its March 2009 low, quickly surpassing the down trend off its October 2007 high (straight red line) and the November 2008 trading high (green line). Long term the stock is in an up trend; the blue line is the lower boundary. In May 2010, the stock broke the up trend off its March 2009 low (intermediate term up trend) and subsequently re-set to an intermediate term trading range. The purple line is the lower boundary. The wiggly red line is the 30 day moving average. The Aggressive Growth Portfolio owns a 75% position (having Sold stock when it broke the intermediate term up trend [$58] and then Bought back a portion of the holding when it re-set to an intermediate term trading range [$47]). The upper boundary of its Buy Value Range is $37; the lower boundary of its Sell Half Range is $81.