Zacks_Analysts' Blog : Rockwell Parts for Bombardier Jets - Analyst Blog

Rockwell Collins Inc. (COL) announced that its Pro Line Fusion avionics system and Primary Flight Control Computer (PFCC) have been selected by Bombardier for use in its Global 7000 and Global 8000 business jets.

Rockwell’s Pro Line Fusion avionics system would enable synthetic vision on the head-up display, reduce pilot workload and enhance safety and passenger comfort by minimizing unexpected turbulence encounters.

The Rockwell Collins PFCC is a core component of the fly-by-wire system featured on the Global 7000 and Global 8000 business jets. It commands the aircraft during flight via electronic signal to the aircraft control surface actuators rather than traditional mechanical means. This allows for the introduction of a range of computer controlled enhancements to benefit the pilot, passenger and operator.

Rockwell Collins is a leading global provider of communication and aviation electronic solutions for commercial and government customers. Its aircraft electronics are installed in business as well as commercial aircraft cockpits and cabins of nearly every airline in the world. Additionally, its airborne and ground-based communication systems transmit approximately 70% of all U.S. and allied military airborne communications.

The company is witnessing a rejuvenated business jet market with rising original equipment and improving aftermarket fortunes. Furthermore, a strong balance sheet, incremental dividend, and the ongoing share repurchase program add visibility to the story.

Earlier, in June 2011, Rockwell Collins announced its decision to sell its Rollmet product line to Precision Castparts Corporation (PCP). The company’s decision to divest the Rollmet business stems from its inclination to have a better focus on its core markets, leading to stronger growth.

The Rollmet business provides seamless alloy and stainless steel pipes and propulsion system components for the energy, petrochemical and defense industries. Rockwell is of the opinion that the sale would also enhance Rollmet’s position as it will now be better aligned with its end-markets. The company expects the sale to close in the fourth quarter of fiscal 2011.

However, the positives are offset by the U.S. government’s delayed funding authorizations, program execution risk, dependence on international sales, high exposure to fixed priced contracts and high research and development overhead. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.