Rockwell Collins Inc.’s acquisition by United Technologies Corp. (UTX - Free Report) for $30 billion has been completed. The transaction has formed an industry-leading aerospace systems supplier — Collins Aerospace Systems.
Notably, the unit has been created by merging United Technologies’ Aerospace Systems division with Rockwell Collins.
Specifications of Collins Aerospace
The newly formed unit comes with net annual sales worth $23 billion and an investment of $3.1 billion in research and development. While 60% of the total sales at this unit comprise original equipment manufacturers sales, the remaining 40% comes from after-market sales.
Currently, Collins Aerospace includes six strategic business units — aerostructures, avionics, interiors, mechanical systems, mission systems, and power & controls. Through these divisions, Collins Aerospace will supply electrical, mechanical and software solutions to customers across the commercial, regional, business aviation and military sectors.
What Happens to Rockwell’s Shareholders?
Now that the acquisition is complete, Rockwell Collins will seize trading in the U.S. share market as an individual public entity as it has become a subunit of United Technologies. As stated earlier in September 2017, when the transaction was being proposed, each of Rockwell Collins’ shareowners will receive $93.33 per share in cash and $46.67 in shares of United Technologies’ common stock in the merger.
Benefits of the Merger
The latest buyout has created one of the world’s largest aircraft-equipment manufacturers. It should help the combined company to become a more critical supplier of components to aircraft companies such as Boeing (BA - Free Report) and Airbus Group .This, in turn, is expected to further strengthen the new company’s position in the aerospace-defense space, thereby benefitting its shareholders.
As a result, United Technologies anticipates the acquisition to be 15-20 cents accretive to adjusted EPS in 2019, including the estimated impact of approximately $650 million of incremental intangible amortization associated with the transaction. The company also expects $500-$750 million of accretion to free cash flow from Rockwell Collins during the same period.
Rockwell Collins has outperformed the industry in a year's time. Shares of the company have gained 6.5% compared with the industry’s 5.6% rise.
Zacks Rank & Other Key Picks
Rockwell Collins currently carries a Zacks Rank #2 (Buy). A few other top-ranked companies in the same sector are Aerojet Rocketdyne Holdings (AJRD), Raytheon Co. (RTN) and Lockheed Martin Corp. (LMT).
While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Raytheon and Lockheed Martin carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Aerojet Rocketdyne delivered an average positive earnings surprise of 19.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 43.3% to $1.82 over the past 90 days.
Raytheon delivered average positive earnings surprise of 6.71% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has climbed 1.7% to $10.10 cents over the past 90 days.
Lockheed Martin pulled off average positive earnings surprise of 13.92% for the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 2.9% north to $17.51 over the past 90 days.
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