(Reuters) - U.S. aviation electronics supplier Rockwell Collins Inc (COL.N) reported a lower-than-expected quarterly profit on Friday, hurt by weaker defense sales, and its shares fell more than 3 percent.
Rockwell Collins is counting on commercial demand to fuel growth as the United States pares defense spending. In the fiscal year that just ended, its sales were roughly 52 percent government-related and 48 percent commercial. Weakness in business jets has also weighed on results.
“Our end markets in defense and the light end of business aviation remain near the bottom of their cycles,” Kelly Ortberg, who became chief executive officer earlier this year, said during a conference call.
Also, gridlock in budget talks in Washington has slowed decision-making. U.S. defense companies are having difficulty as the Pentagon’s acquisition programs are canceled or delayed.
“The political environment in the U.S. is making it increasingly difficult to plan our business as no one knows what the next round in negotiations will yield,” Ortberg added.
Net income rose 15 percent to $175 million, or $1.28 a share, in the fourth quarter ended September 30 from $152 million, or $1.06 a share, a year earlier, when there was a higher share count.
Analysts on average expected $1.31 a share, according to Thomson Reuters I/B/E/S.
Sales fell 1 percent to $1.25 billion. Commercial system sales rose 3 percent, while government-related sales dropped 5 percent.
The company has reduced its business in some defense segments and cut jobs as U.S. military spending has waned. It is looking to bolster its commercial business with the planned purchase of Arinc, which designs systems that help airline pilots communicate with the ground.
For the fiscal year that began in October, Rockwell Collins reiterated its forecast of $4.30 to $4.50 a share in earnings and $4.5 billion to $4.6 billion in revenue. Analysts expect a profit of $4.42 a share on revenue of $5.15 billion.
Shares of Rockwell Collins were down 3.2 percent at $69.96 in morning trading.
Reporting by Karen Jacobs in Atlanta; Editing by Lisa Von Ahn and John Wallace