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Rockwell Collins: The View from Altitude for 2016

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Rockwell Collins’s year-to-date stock performance

Rockwell Collins (COL) has grossly underperformed the market in terms of year-to-date (or YTD) returns until July 14. The company’s YTD returns are -5.3%, which is 12.8% lower than the S&P 500 returns of 7.5%.

The comparison with the YTD stock returns of peers in the aerospace (PPA) sector makes an even more striking contrast, as the peers have done much better than the market. The YTD returns of Honeywell (HON) and United Technologies have been 16.1% and 10%, respectively.

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Pricing multiples

On July 14, 2016, Rockwell Collins (COL) stock closed at $85.82, and it had a trailing PE[1. price-to-earnings] ratio of 17x. This was lower than its five-year high of 20x in March 2015. The company’s price-to-current-year earnings estimate is trading at a multiple of 15.6x, which is lower than its two-year high[2. based on available data] of 17.9x it achieved in November 2015.

Among its aerospace (XAR) peers, Honeywell is trading at trailing PE ratio of 18x, which is much lower than the five-year high of 21.3x it had in March 2012. However, Honeywell’s price-to-current-year earnings multiple is at an all-time high of 17.9x. The trailing PE ratio of the S&P 500 is also at a five-year high of 19.7x.

United Technologies (UTX) is trading at a trailing PE ratio of 16.6x, which is lower than its five-year high of 19.7x in September 2013. Its price-to-current-year earnings of 16x is near its two-year high of 16.2x in April 2016.

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