Critical Analysis: Precision Castparts (PCP) versus Rockwell Collins (COL)

Precision Castparts (NYSE: PCP) and Rockwell Collins (NYSE:COL) are both large-cap industrials companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, risk, profitability, dividends, valuation, analyst recommendations and institutional ownership.

Institutional & Insider Ownership

71.4% of Rockwell Collins shares are owned by institutional investors. 1.1% of Rockwell Collins shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Precision Castparts and Rockwell Collins’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Precision Castparts 15.17% 12.16% 6.86%
Rockwell Collins 10.99% 19.58% 6.43%

Dividends

Precision Castparts pays an annual dividend of $0.12 per share and has a dividend yield of 0.1%. Rockwell Collins pays an annual dividend of $1.32 per share and has a dividend yield of 1.0%. Precision Castparts pays out 1.3% of its earnings in the form of a dividend. Rockwell Collins pays out 24.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Analyst Ratings

This is a summary of recent recommendations for Precision Castparts and Rockwell Collins, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Precision Castparts 0 0 0 0 N/A
Rockwell Collins 1 16 3 0 2.10

Rockwell Collins has a consensus price target of $130.53, suggesting a potential downside of 3.96%. Given Rockwell Collins’ higher probable upside, analysts clearly believe Rockwell Collins is more favorable than Precision Castparts.

Earnings and Valuation

This table compares Precision Castparts and Rockwell Collins’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Precision Castparts N/A N/A N/A $9.53 24.65
Rockwell Collins $6.82 billion 3.27 $705.00 million $5.38 25.26

Rockwell Collins has higher revenue and earnings than Precision Castparts. Precision Castparts is trading at a lower price-to-earnings ratio than Rockwell Collins, indicating that it is currently the more affordable of the two stocks.

Summary

Rockwell Collins beats Precision Castparts on 8 of the 12 factors compared between the two stocks.

About Precision Castparts

Precision Castparts Corp. is a manufacturer of metal components and products. The Company has three business segments: Investment Cast Products, Forged Products and Airframe Products. The Company’s Investment Cast Products segment manufactures investment castings and provides related investment casting materials and alloys, for aircraft engines, industrial gas turbine (IGT) engines, airframes, armaments, medical prostheses, unmanned aerial vehicles and other industrial applications. The Company’s Forged Products segment manufactures forged components from titanium and nickel-based alloys, and nickel, titanium and cobalt-based alloys for aerospace and non-aerospace markets, which include products for oil and gas, chemical processing and pollution control applications. The Company’s Airframe Products segment manufactures fasteners, fastener systems, fluid fittings, aerostructures and precision components, primarily for aerospace applications.

About Rockwell Collins

Rockwell Collins, Inc. designs, produces and supports communications and aviation systems for commercial and military customers. The Company provides information management services through voice and data communication networks and solutions across the world. The Company operates through three segments: Commercial Systems, Government Systems and Information Management Services. The Commercial Systems segment supplies aviation electronics systems, products and services to customers located throughout the world. The Government Systems segment provides a range of electronic products, systems and services to customers including the United States Department of Defense, various ministries of defense, other government agencies and defense contractors around the world. The Information Management Services segment provides communications services, systems integration and security solutions across the aviation, airport, rail and nuclear security markets.

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