Rockwell Collins, Inc. (COL): Why Jeff Ubben’s VA Capital Reduced Its Stake?

ValueAct Capital, a fund managed by Jeffrey Uben, has disclosed slightly decreasing its activist stake in Rockwell Collins, Inc. (NYSE:COL). According to a new filing with the Securities and Exchange Commission, ValueAct currently owns around 11.19 million shares of the company, down from 12.01 million disclosed in the latest 13F filing. The position amasses 8.3% of Rockwell Collins’ outstanding common stock.


In addition, ValueAct said that it sold 819,372 shares during the last couple of days. The securities have been disposed of in several transactions, the average price amounting to $79.74 apiece.

Looking at Rockwell Collins, Inc. (NYSE:COL)’s chart of the last couple of days, one can notice a spike on September 19, which is the day when ValueAct started to sell its shares. But what caused this upsurge of the company’s stock? It’s pretty easy to figure that out taking into account that on September 19, the company announced its guidance for the fiscal year 2015 and added that its Board has approved an additional $500 million for share repurchase.

Under its guidance, Rockwell Collins, Inc. (NYSE:COL) said that it forecasts its revenue to amount in the range between $5.2 billion and $5.3 billion, while earnings per share are expected between $4.90 and $5.10. The cash flow of operatings and total segment operating margings are expected in ranges of $675-$775 million and 20.5%-21.5% respectively.

Therefore, with the latest upsurge, Rockwell Collins managed to gain some ground lost during the August sell-off, and ValueAct decided to take advantage of the opportunity and gain some profits from that. Moreover, ValueAct, despite having an activist stake, has been reducing its position in the company over the last several quarters. Last year, ValueAct said that it plans to monitor Rockwell Collins, Inc. (NYSE:COL)’s performance and engage in discussions with the company’s management regarding the shareholder value of the company and strategies that might increase it. However, so far, ValueAct has not taken any steps. Meanwhile Rockwell Collins has been posting a solid performance, beating and meeting the estimates in terms of earnings and revenues respectively. The stock of the company gained around 6% since the beginning of the year, and added around 13% over the past year.

Rockwell Collins, Inc. (NYSE:COL) is a $10.6 billion market cap company that is focused on design, development and support of communication electronics for the commercial and miliatry aerospace industry. The company also stands out from the competitive point of view, having, among its customers, aerospace leading companies such as Boeing or Embraer. Moreover, its stock trails a solid P/E ratio of 18.00, versus an industry average of 19.00.

While there is still time for ValueAct to go activist on Rockwell Collins, Inc. (NYSE:COL), other investors also seem to be bullish on the company, as our records of 13F filings show. In the latest round of 13F filings, among the institutional investors that raised their exposure to Rokwell Collins is Thomas Steyer‘s Farallon Capital, which upped its stake by  37% during the second quarter to approximately 1.31 million shares. David Harding‘s Winton Capital Management increased its exposure by 29% to 352,100 shares.

Disclosure: none