Rockwell Collins Earnings: An Early Look

2013 is here, and earnings season has already started ramping up. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Rockwell Collins (COL). The aerospace and defense company has had an exceptionally strong quarter from a stock performance standpoint, especially considering the struggles that many of its peers have faced in light of potential budget cuts. Can the company keep up the pace? Let's take an early look at what's been happening with Rockwell Collins over the past quarter and what we're likely to see in its quarterly report Friday morning.

Stats on Rockwell Collins

Source: Yahoo! Finance.

Will Rockwell Collins earn well?
Rockwell Collins' stock has risen 11% in the past three months, but analysts expect a mixed boat from its quarterly report. After a strong earnings beat in its fiscal fourth-quarter report back in October, Rockwell is expected to see a marked decline in sales and modest profit growth. Moreover, analysts have cut a full dime off their EPS estimate since mid-October, which is consistent with the general lowering of the earnings bar that a few other companies have experienced.

As a maker of aviation electronics and communication equipment, Rockwell Collins has benefited greatly from strong growth in the aerospace industry. Back in November, it won a place on Boeing's (BA -0.80%) 737 MAX aircraft, with Boeing entering into a contract for Rockwell to provide LCD displays for the plane's flight deck.

Still, Rockwell hasn't been completely immune from government spending pressures. Last year, the Pentagon decided not to continue its Ground Mobile Radio program, on which Rockwell was working with Northrop Grumman (NOC -0.05%), Harris (LHX 1.18%), and Boeing. The move crushed all four companies, with the contract's loss meaning as much as $20 billion in potential revenue disappeared. Similar slashes to sales could be in store for Rockwell if the government can't agree to more targeted spending cuts to replace sequestration.

Beyond the company's own numbers, Rockwell investors need to look for signs that Boeing is getting its act together enough to sustain Rockwell's part of the big aerospace pie. Otherwise, the slowdown in growth we're expected to see on Friday could be just the beginning of a much more alarming trend.

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