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Textron (TXT) Wins $815M Deal to Repair Combat Helicopters

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Textron Inc.’s TXT Bell segment recently clinched a contract to repair and upgrade 35 items used on the UH-1Y and AH-1Z helicopters. Majority of the work related to the deal is scheduled to be completed by Fort Worth, TX.

Valued at $815 million, the contract was awarded by the Naval Supply Systems Command Weapon Systems Support, Philadelphia, PA. Per the terms of the contract, Textron will also be responsible for inventory management, warehousing and establishing supply response time metrics. The contract is expected to be completed by December 2024.

About UH-1Y and AH-1Z Aircraft

Bell UH-1Y, also known as Super Huey, is a twin-engine combat-proven utility helicopter to support U.S. Marine Corps’ global missions. Initially, these helicopters were remanufactured from UH-1Ns. But in 2005, it received approvals to be built as separate units.

With virtually identical front and rear glass cockpits, fully integrated weapons, avionics and communications systems, Bell AH-1Z flies with the most advanced aircraft weapons and survivability equipment in the world. AH-1Z’s Target Sight System also provides the longest range and highest accuracy among all helicopters.

Our View

Textron's Bell segment is one of the leading suppliers of advanced military helicopters to the U.S. government and military customers outside the United States and secures pivotal contracts like the latest one. Apart from supplying helicopters, the segment also provides invaluable support to offshore petroleum exploration and development, emergency medical helicopter operators, and foreign governments.

With increasing geopolitical tensions worldwide, demand for weaponries is on the rise. To meet this demand, the fiscal 2019 U.S. defense budget provisioned $57.7 billion for military aircraft, which reflects a 4.9% increase from the prior budget. Such favorable budgetary provisions are leading to contract wins for defense contractors and Textron is no exception. This is evident from the latest contract win.

Looking Ahead

Per a Frost and Sullivan forecast, the global combat aircraft market is expected to witness CAGR of 0.3% to $47.2 billion by 2026 from 2017. Such growth can be attributed to the rise in global threats, geopolitical instabilities and increased spending on defense. These projections should continue to boost demand for Boeing’s fighter jets and other combat aircraft programs.

Price Performance

In a year’s time, shares of the company have lost 4% against the industry’s growth of 27.7%.

Zacks Rank & Key Picks    

Textron currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the same space are L3Harris Technology Inc LHX, Leidos Holdings, Inc. LDOS and Air Industries Group AIRI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

L3Harris’ long-term growth estimate currently stands at 10.4%. The company delivered average positive earnings surprise of 5.02% in the last four quarters.

Leidos delivered average positive earnings surprise of 8.93% in the last four quarters. Its long-term growth estimate currently stands at 7.5%.

Air Industries Group delivered average positive earnings surprise of 52.78% in the last four quarters. The Zacks Consensus Estimate for 2019 loss has improved 63.6% to 4 cents over the past 60 days.

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