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Textron Wins $273M Deal to Manufacture Combat Helicopters

Zacks Equity Research
·3 mins read

Textron Inc.’s TXT Bell segment recently clinched a contract for manufacturing eight UH-1Y and four AH-1Z helicopters. The majority of the work related to the deal is scheduled to be completed in Fort Worth, TX.

Valued at $272.2 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, MD. Post completion, these helicopters will be delivered to the government of the Czech Republic.

Textron is expected to complete the deal by November 2023.

Growing Helicopter Demand & Textron

A rapid increase in terror attacks has compelled nations to strengthen their arsenal and bump up defense budget. With the United States being the largest exporter of defense equipment across the world, the nation enjoys a steady flow of contracts for its combat-proven weaponries from both Pentagon and its foreign allies. With military jets and helicopters constituting a major portion of a nation’s armaments, there is a steady flow of contracts for these weaponries.

With Bell copters capturing a major share of the military helicopter space, thanks to their advanced mission capabilities, the AH-1Z and UH-1Y models enjoy a decent demand drive across the globe.

Notably, Bell AH-1Z’s Target Sight System provides the longest range and highest accuracy of any helicopter sight in the world. On the other hand, sharing 85% commonality with the AH-1Z, the Bell UH-1Y is the only utility helicopter built to simplify maintenance, training, and supply efforts. The unique features of these helicopters have made them all the more desirable in the combat helicopter market.

How Will the Deal Aid Textron?

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.

Impressively, amid the coronavirus-led uncertainty, Bell segment’s revenues recorded solid 6.6% year-over-year growth in the second quarter of 2020. This indicates that its products still enjoy solid demand in the defense space and will continue to boost its growth trajectory. The latest contract win is yet another testament to that.

Looking Ahead

Per a Morder Intelligence report, the global attack helicopter market is expected to witness CAGR of more than 4% during 2020-2025 time period. Such growth can be attributed to the rise in global threats, geopolitical instabilities and increased spending on defense. These projections should continue to boost growth for major combat helicopter producers like Textron, Boeing BA and Lockheed Martin LMT.

Price Performance

In a year’s time, Textron has lost 18.8% compared with the industry’s decline of 29.6%.

Zacks Rank & Key Picks

Textron currently carries a Zacks Rank #3 (Hold).

A better-ranked company in the same sector is Teledyne Technologies TDY, which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Teledyne delivered four-quarter average earnings surprise of 11.7%. The Zacks Consensus Estimate for 2020 earnings has moved up 4.8% to $9.75 in the past 90 days.

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