Rockwell Collins Wins $105M Contract to Upgrade KC-135

Rockwell Collins Inc. COL has won a contract from the U.S. Air Force for upgrading Block 45 of the KC-135 jet's cockpit with analog or digital Group B kits. It includes foreign military sales and is worth $105.9 million.

Scheduled to be over by Sep 29, 2024, contract work will be performed in Cedar Rapids, IA.

Contracting activity is the Air Force Life Cycle Management Center, Tinker Air Force Base, OK.

Symbolizing the strong alliance between Rockwell and the U.S. Air Force, the KC-135 Global Air Traffic Management ("GATM") is one of the most successful acquisition programs of the Air Mobility Command. Rockwell Collins is the prime contractor of this program. The company provides technology through an open systems approach, so as to upgrade the aircraft for changing Communications, Navigation, Surveillance/Air Traffic Management ("CNS/ATM") requirements. This has enabled global flights in both the commercial and military airspace.

Rockwell Collins is the foremost global supplier of communications and avionics equipment for both commercial and military customers. The company's balanced exposure to both types of customers allows it to use government funding for developing products for the dual-end market. The dual-end market leads to higher volume sales, which create economies of scale in cost-sensitive government contracts. A diversified portfolio, comprising both commercial and government customers, protects it from risks of reduced orders from either customer class.

Recently, Rockwell Collins announced that it has been selected by Sikorsky Aircraft to provide avionics and mission equipment for the Air Force's CRH program. This includes the cockpit flight and mission display system, navigation radios and the advanced ARC-210 V/UHF communication system.

However, the company's fiscal third-quarter 2015 revenues were affected by weakness in commercial aftermarket sales and headwinds associated with foreign currency rates. Rockwell Collins lowered the high end of its earnings guidance for fiscal 2015 due to the softness in demand. Dependence on international sales, delays in funding authorizations by the U.S. government and higher exposure to fixed-price contracts raise our concerns.

Zacks Rank

Rockwell Collins currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the aerospace and defense sector are LMI Aerospace Inc. LMIA, Spirit AeroSystems Holdings, Inc. SPR and Rolls Royce Holdings plc RYCEY. While LMI Aerospace sports a Zacks Rank #1 (Strong Buy), Spirit AeroSystems and Rolls Royce carry a Zacks Rank #2 (Buy).

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