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Textron Wins $98M Material Delivery Deal for SSC Program

Zacks Equity Research
Textron's (TXT) Ship-to-Shore Connector (SSC) is an air cushion vehicle and the functional replacement for the existing fleet of its old vehicles.

Textron Inc. TXT recently secured a $98-million modification contract for procuring additional long-lead-time material (“LLTM”) for the Ship-to-Shore Connector (“SSC”) program and providing pre-fabrication activities for the Landing Craft Air Cushion (LCAC) program. The contract was awarded by the Naval Sea Systems Command, Washington, DC.

Work related to the deal will be performed in New Orleans, LA; Cincinnati, OH and various other locations across the United States. The entire task related to the contract is expected to get completed by December 2021. Textron will utilize fiscal 2017 shipbuilding and conversion (Navy), and fiscal 2018 shipbuilding and conversion (Navy) funds for performing the task.

A Brief Note on Textron’s SSC and LCAC Program

The SSC is an air cushion vehicle and the functional replacement for the existing fleet of vehicles, which are nearing the end of their service life. The SSC’s mission is to land surface assault elements in support of operational maneuver from the sea at over-the-horizon distances, while operating from amphibious ships and mobile landing platforms.

The LCAC is a high-speed, over-the-beach, fully amphibious landing craft capable of traversing snow, marsh, ice, tundra and sand. The LCAC is designed to function in extreme conditions, from Arctic cold to Sahara heat, on missions ranging from transporting cargo to minesweeping.

Our View

Textron’s Marine and Land Systems unit develops the U.S. Navy’s next generation Landing Craft Air Cushion as part of the SSC program. Interestingly, this also is Marine and Land Systems’ primary U.S. Government program. So, no doubt, this program enjoys a strong demand in the U.S. defense space, which, in turn, is likely to boost Textron’s top line.

It is imperative to mention here that Marine and Land Systems unit has been witnessing top line deceleration recently, owing to lower deliveries for Tactical-Armoured Patrol Vehicle (TAPV). Now, the latest contract win should enable this unit to make a rebound and register positive revenue growth in the third quarter of 2018.

Moreover, in June, the U.S. Senate approved the fiscal 2019 defense budget of $717 billion, reflecting 5% real growth more than the initial fiscal 2018 budget. Textron, being one of the prominent defense contractors in the United States, will benefit from such a budgetary amendment.

Other companies from the same space like Lockheed Martin LMT, General Dynamics GD and The Boeing Company BA are also expected to gain significantly from this budget revision.

What Lies Ahead?

Per Technavio, the global amphibious landing craft market is expected to generate more than $10 billion in revenues by 2020. Such growth can be attributed to the increased use of air cushion technology being employed in landing crafts due of its numerous benefits in civil and military applications, in recent years. This, in turn, should enable Textron to significantly grow in the expanding market, going ahead.

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