Rockwell Collins’s (COL) Government Systems segment provides a variety of defense-related systems, products, and services comprising:
- avionics subsystems
- navigation products and systems, including radio navigation products, global positioning system (or GPS) equipment, communications systems and products
- cockpit display products including multipurpose flat panel head-down displays, wide field of view head-up, and helmet-mounted displays
- precision targeting and range systems
- simulation and training systems, including visual system products and services
The company’s Government Systems segment competes with L-3 Communications Holdings (LLL), Northrop Grumman’s (NOC) electronics system segment, and Raytheon Company’s (RTN) integrated defense system, some of which are a part of the iShares Dow Jones US Industrial ETF (IYJ).
Performance in 4Q14
Let’s now take a look at the performance of COL’s Government Systems segment in the fourth quarter.
This segment saw a decline of 5% year-over-year in its revenues to $605 million, due to the lower sales on programs such as the KC-46, KC-135, and E-2 aircraft, as well as lower deliveries of international targeting systems. These declines were partially offset by increased sales of Joint Tactical Radio System Manpack and Joint Helmet Mounted Cueing Systems.
The fourth quarter saw good performance in Rockwell Collins’s communication products, which was more than offset by the poor performance in avionics, surface solutions, and navigation products. The segment’s operating earnings also fell by 9% year-over-year to $137 million due to lower sales and higher bid and proposal expenses.
US defense cuts
Although US defense cuts and pressures in Europe subdued the demand, regional conflict will continue to drive Rockwell Collins’s revenues from the government systems segment. The company will continue to focus on international opportunities. It plans to increase Government Systems’s international revenue to 35% in 2018 from 32% in 2014.
In our next article, we’ll explore the company’s Information Management Services segment.