Rockwell Collins Confident on Jet Ramp -- 2nd Update
January 20 2017 - 2:19PM
Dow Jones News
By Doug Cameron
New jetliner deliveries should continue to rise through the end
of the decade even with the dip in orders that has spooked
investors, the head of one of the aerospace industry's largest
suppliers said Friday.
Rockwell Collins Inc. Chief Executive Kelly Ortberg also
expressed optimism that the new administration could be a catalyst
for the long-awaited recovery in the business-jet market after
years of flat or declining sales.
Mr. Ortberg said he expected a repeat of the previous cycle for
big jets when backlogs at Boeing Co. and Airbus Group SE sustained
production even as orders dipped and more airlines sought to defer
new aircraft.
"We're going to continue to see the narrow-body because of the
strong backlog, continue to ramp up at both [companies]," he said,
forecasting that the order cycle would continue through 2020 when
Boeing's new 777X jet is due to enter service.
Boeing and Airbus last year both secured new orders that fell
short of their deliveries but still plan to boost output over the
next three years for most models, the exception being some widebody
jets where demand has weakened over the past two years.
Cedar Rapids, Iowa-based Rockwell Collins has doubled down on
what some analysts call a supercycle that has amassed a $1 trillion
order book for the two big plane makers, including 10,000 more
fuel-efficient narrow-body jets that will become the backbone of
the global airline industry.
Rockwell Collins in October agreed to pay $6.4 billion for B/E
Aerospace Inc., one of the biggest makers of aircraft seats and
interiors, marrying it with its own specialty in cockpit and
communication systems.
The proposed deal received a mixed reception from some analysts
who viewed it as pricey and questioned the timing, but Mr. Ortberg
said investors had warmed to the potential synergies and expected a
shareholder vote in March. Subject to investor and regulatory
approval, he expects it to close by May. France's Safran SA this
week agreed to pay $9 billion for the other large seat maker,
Zodiac Aerospace SA.
His comments came as Rockwell Collins opened the aerospace and
defense reporting season with fiscal first-quarter profits that
fell short of expectations because of costs related to the B/E
Aerospace deal, though the company reaffirmed its full-year
guidance. Its shares were recently up 1.6% at $90.65 in a weak
session for a sector that has underperformed so far this year.
Rockwell Collins also has a large defense business, providing
systems on jets such as the Lockheed Martin Corp. F-35 and Boeing's
Pegasus refueling tanker. Sales are expected to grow with rising
military spending, though Mr. Ortberg said they could be crimped
this year if the temporary Pentagon budget that runs through April
is extended.
The defense and business jet markets have weighed on Rockwell
Collins over the past few years, but the run-up in stock markets
and potentially more supportive tax policies from the Trump
administration have increased optimism that the latter will also
start to improve.
"I'm hopeful the new administration will create confidence in
the marketplace," said Mr. Ortberg. "It could be the catalyst we
need," he said.
Rockwell Collins reported profits of $145 million for the
quarter compared with $135 million a year earlier, with per-share
earnings rising to $1.10 from $1.02. Revenue increased 2.1% to
$1.19 billion.
Write to Doug Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
January 20, 2017 14:04 ET (19:04 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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