Rockwell Collins Inc. (COL): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Rockwell Collins, Inc. reported mixed results in the third quarter of fiscal 2014 as earnings beat the Zacks Consensus Estimate but sales missed. On a year over year basis, the top and bottom lines improved primarily due to strong contribution from the Information Management Services segment due to the ARINC Inc. acquisition, higher commercial aftermarket & original equipment sales, and an effective share buyback program. The company's revenues at the Commercial Systems segment is expected to improve in the future due to higher demand for the Boeing 787 aircraft. Rockwell Collins stable financial position, steady focus on research & development activities and systematic investment in inorganic growth programs are expected to boost its future performance. However, dependence on international sales, delays in funding authorizations by the U.S. government and higher exposure to the fixed price contracts raise concerns. Thus, we maintain our Neutral recommendation.

Overview:

Cedar Rapids, IA-based Rockwell Collins, Inc. was incorporated in Mar 2001. The company designs, manufactures, and supports software and hardware solutions for aircraft communication, navigation, signals intelligence, and weapons systems as well as surveillance systems for government, military, and commercial applications.

Rockwell Collins has operations in the U.S., France, Canada, U.K., Germany, China, Japan, Singapore, India, Israel, Australia, Chile and Brazil. The company also has engineering facilities, sales offices, warehouses and service locations in 27 countries worldwide.

On Dec 2013, Rockwell Collins acquired airline communications and information processing solution major, ARINC Inc., a portfolio company of The Carlyle Group, for a whopping $1.42 billion. Hence, beginning first quarter of fiscal 2014, Rockwell Collins created a new Information Management Services segment. Certain amounts previously included in the Commercial Systems segment have been reclassified to the newly formed segment.

Earlier, Rockwell Collins served its worldwide customer base through two business segments: Government Systems and Commercial Systems. The company currently has three segments Government Systems, Commercial Systems and Information Management Services.

Government Systems business supplies defense electronics and integrated systems, including communication, navigation, and displays for airborne, ground, and shipboard applications to the U.S. Department of Defense (DoD), foreign militaries, and manufacturers of military aircraft and helicopters. These systems, products and services support airborne (fixed and rotary wing), ground and shipboard applications. Government Systems product category sales are divided into airborne and surface solutions.

Airborne solutions focus on tanker, rotary wing, fighter/bomber, unmanned aerial vehicles (UAV) and precision weaponry platforms.

Surface solutions focus on handheld cum vehicle-mounted navigation devices, communications and navigation products.

Commercial Systems business supplies air transport aviation electronics (original and after market equipment and wide-body in-flight entertainment) and business and regional aviation electronics (original and after market equipment).

During first-quarter 2014, Rockwell Collins formed a new business division, Information Management Services segment, clubbing up the newly acquired operations of ARINC Inc. and the existing flight services business.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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