Rockwell Collins Inc.(COL), a supplier of avionics and military equipment, acquired Blue Ridge Simulation Inc., a leading supplier of high-performance sensor simulation to the U.S. Department of Defense, commercial and international training applications.
Based in Leesburg, Virginia, Blue Ridge Simulation provides a broad portfolio of high-performance sensor simulation that span from basic weather radar simulators to high-performance Digital Radar Landmass Simulators. It helps in the surveillance and fire control radar applications.
Rockwell Collins expects the acquisition to expand its sensor simulation technology, product range and capability. Blue Ridge Simulation will became a part of Rockwell Collins’ simulation and training portfolio based in Sterling, Virginia. This portfolio spans the entire training life cycle, from instructional systems design through fully integrated, high fidelity training systems and support.
Rockwell Collins is the foremost global supplier of communications and avionics equipment for both commercial and military customers. Its balanced exposure to both types of customers allows the company to avail government funding to develop products for the dual-end market. The dual-end market leads to higher volume sales, which create economies of scale that help attain cost-sensitive government contracts.
Rockwell Collins’ fortunes are tied to the cyclical commercial aerospace market, which is currently undergoing a steady recovery. As per The Boeing Company’s (BA) Current Market Outlook (CMO) the world economy will continue to rebound going forward.
Boeing pointed out that the airlines industry will see a rebound in passenger and cargo traffic revenue this year and should return to profitability in 2011. This would come as a welcome relief for Rockwell Collins, for it generated 42% of its fiscal 2009 revenue from aircraft manufacturing; airlines; and business jet owners/operators.
In the near-term however, risks regarding realignment of 2012 defense budget focus, pace of business jet market recovery, tepid air transport aftermarket sales growth and high research & development cost will affect the fortunes of Rockwell Collins, a Zacks #3 Rank (Hold) stock. We currently have a long-term (6 months and higher) ‘Neutral’ recommendation on Rockwell Collins.
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