Rockwell Collins, Inc. (NYSE:COL) is among the leading providers of electronics for both civilian and military aviation. Chances are, you have used an in-flight entertainment screen on board a recent flight, without necessarily having paid attention to Rockwell Collins stock. Meanwhile, a pilot flying an “F-15” or “F-22” over the sky on a bombing mission against ISIS in Iraq is relying on a Rockwell Collins helmet.
That’s one of the reasons Rockwell is such an interesting investment proposition. It has commercial and military applications. These are essential items, requiring sophisticated technology, but few ever stop to consider them beyond the obvious. Another reason why Rockwell Collins stock is appealing is that it has gained 77% over the past five years. If you consider their Wall Street debut in 2001, COL shares have more than tripled.
In 2001, Rockwell International spun off its avionics division to form the current Rockwell Collins, Inc., retaining its name. Rockwell Collins is heavily concentrated in the defense and commercial markets for avionics. The company has since acquired several of its competitors, thinning out the field. Some of the most important include the Hughes-AVICOM flight entertainment industry and Sony Corp (ADR) (NYSE:SNE) in-flight entertainment industry (Sony Trans Com).
Rockwell Has Few Competitors
Rockwell has some competition, but the company dominates the market. It has even less competition when you consider its dual military/commercial clients. But to get a better idea of the range of products it makes, consider Panasonic Corporation (ADR)’s (OTCMKTS:PCRFY) Panasonic Avionics Corporation division, France’s Thales Group and JetBlue Airways Corporation’s (NASDAQ:JBLU) subsidiary LiveTV. Rockwell Collins also supplies cockpit electronics to a number of airplanes. Its potential for the next few years comes from the huge backlog of commercial airliner orders, including both Boeing Co (NYSE:BA) and Airbus.
But it also gains from rising world tensions. It’s not nice to acknowledge, but war and insecurity sell a lot of expensive hardware to various governments. Rockwell Collins designs and manufactures some of the less visible, but by no means less important, battlefield tools that make all the difference between a win and a loss.
As an example of the kind of item that will contribute to Rockwell stock in the next year, consider the new helmet-mounted “Integrated Digital Vision System.” Soldiers will love it because of its combination of mission data capability with multi-spectral vision. Troops can use it during the day as well as at night. (Source: Rockwell Collins debuts helmet-mounted Integrated Digital Vision System, UPI, September 6, 2016.) That’s the kind of advantage that leads government military procurers to salivate.
COL Stock is Attractive
Now COL stock is trading at about $85.00. It’s likely that COL shares could see the 52-week high of $95.11. In the worst-case scenario, consider that COL shares had a low of $76.03 in the same period. I am certainly leaning toward the bullish side, because Rockwell Collins supplies equipment all over the world. Indeed, the demand for complicated and high-tech avionics has grown globally. In that sense, consider COL the kind of stock you find in the quality aisle.
Military spending is expected to rise, especially if Hillary Clinton wins the right to reside at the White House in 2017. Rockwell Collins, unlike the big hardware-makers like Lockheed Martin Corporation (NYSE:LMT) or Boeing, does not sell items that end up costing billions of dollars. They sell items like avionics and night-vision helmets that help armies gain huge tactical advantages at minimal cost.
For that very reason, Rockwell Collins has the right positioning to transfer military technology to the wider commercial public. An example that you may have used today is the global positioning system. What’s that? It’s the GPS system in your car. Rockwell Collins was the first company to receive and track a GPS satellite signal—way back in 1977, when such technology was classified and considered a major asset in fighting the Cold War.
Rather than spend billions of dollars on modernizing an entire fleet of planes, the U.S. military, as well as airlines around the world, rely on Rockwell Collins to supply the next generation of electronics that modernize cockpits, whether in a “Boeing 737” or an “F-15” fighter jet. This is what makes COL stock so interesting, and why it has such potential.