Rockwell Collins Inc. (COL) completed the acquisition of AR Group Inc. and its affiliated companies, including Air Routing International, a premier provider of trip support services for business aircraft flight operations. Rockwell Collins already has a significant foothold in the aircraft electronic systems market. The acquisition will expand its business to include flight planning and trip support for aircraft flight operations. Under the terms of the agreement, Rockwell Collins will acquire all outstanding shares of AR Group Inc. and its affiliated companies.
 
Rockwell Collins expects the acquisition to be neutral to its fiscal year 2010 earnings. For the fiscal year 2010, Rockwell Collins expects revenues in the range of $4.6 billion to $4.8 billion, EPS in the range of $3.35 to $3.55, and cash flow from operations of $600 million to $700 million. For fiscal 2010, total segment operating margins are expected in the range of 18.5% to 19.5%.
 
Headquartered in Cedar Rapids, Iowa, Rockwell Collins engages in the design, production and support of communications and aviation electronics for military and commercial customers worldwide. Going forward, strong defense outlays, strong balance sheet, incremental dividend and an ongoing share repurchase program support our bullish outlook for Rockwell Collins.
 
Also, compared to its peers such as Alliant Techsystems Inc. (ATK), Precision Castparts Corporation (PCP), Spirit AeroSystems Holdings Inc. (SPR) and Elbit Systems Ltd. (ESLT), Rockwell Collins is trading at a discount based on forward earnings estimates. The bullish outlook however would be offset by the dwindling fortunes of the commercial aerospace market, dependence on international sales, high exposure to fixed price contracts and high research and development overhead. Thus we maintain our market Neutral recommendation on the shares.
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