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Textron Wins $510M Navy Deal for Building AH-1Z Aircraft

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Textron Inc.’s TXT business segment, Bell, recently secured a $510-million modification contract for manufacturing and delivering 29 units of AH-1Z new aircraft of the 15th Lot, in support of the Marine Corps H-1 upgrade program. The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.

Per the terms, the contract entails the company to provide long lead material and components for an additional seven Lot 16 aircraft. Work related to the deal will majorly be performed in Fort Worth and Amarillo, TX, which is expected to get completed by February 2021.

A Brief Note on AH-1Z Attack Helicopters

Textron's Bell AH-1Z is built to meet the expeditionary requirements of the United States Marine Corps. With virtually identical front and rear glass cockpits, fully integrated weapons, avionics and communications systems, the marinized Bell AH-1Z flies with the most advanced aircraft weapons and survivability equipment in the world. The Zulu is the only attack helicopter in the world with a fully-integrated air-to-air missile capability. The AH-1Z’s Target Sight System also provides the longest range and highest accuracy of any helicopter sight in the world.

Furthermore, the military helicopter is equipped to carry payloads up to 5,764 pounds, can fly as fast as 222 knots with a  range of 370 nautical miles and as high as 20,000 feet. The AH-1Z carries a 20-millimeter Gatling gun that can fire 70-millimeter Hydra rockets, AIM-9 Sidewinder air-to-air missiles, and AGM-114 Hellfire air-to-ground missiles.

What’s Favoring Textron’s Bell Segment?

Textron's Bell segment is one of the leading suppliers of advanced military helicopters to the U.S. Government and to military customers outside the United States. As a result, the company has successfully been able to procure pivotal contracts. Apart from supplying helicopters, the segment also provides support to corporate, offshore petroleum exploration and development, utility, charter, police, rescue and emergency medical helicopter operators, and foreign governments.

Moreover, from the viewpoint of its military business, the company signed a third V-22 multiyear procurement contract with the U.S. Department of Defense for delivering 58 units, beginning in 2020. The multiyear contract is worth $4.2 billion, of which $2.2 billion represents Bell’s content. The contract also has flexibility structured to allow for additional aircraft.

Interestingly, the company also gained congressional approval in the second quarter to provide 12 H-1 attack helicopters to Bahrain. Also, in the first six months of 2018, the Bell segment contributed a significant 22.3% of the company’s total revenues. With such development within the segment highlighted by solid order growth, considering the latest contract win, we may expect the Bell segment to reflect similar solid performance in the third quarter as well.

Price Movement

Textron’s stock improved about only 42.5% in the last year compared with the industry’s growth of 21.9%. The outperformance was led by the company’s strong order growth history along with solid delivery figures.

Zacks Rank & Stocks to Consider

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

A few better-ranked stocks in the same sector are Aerojet Rocketdyne Holdings AJRD, Engility Holdings EGL and Huntington Ingalls Industries HII.

While Aerojet Rocketdyne Holdings sports a Zacks Rank #1 (Strong Buy), Engility Holdings and Huntington Ingalls carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet Rocketdyne came up with an average positive earnings surprise of 9.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 30.9% to $1.27 in the last 90 days.

Engility Holdings delivered an average positive earnings surprise of 19% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 18.9% to $2.02 in the last 90 days.

Huntington Ingalls Industries came up with an average positive earnings surprise of 9.48% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 3.8% to $17.25 in the last 90 days.

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