America needs a new top (helicopter) model.
Boeing Apache attack helicopters: Time to fly off into the
sunset? Photo: Boeing.
First flown in 1975, our fleet of
Apache attack helicopters is "pushing 40," and beginning to show
' Sikorsky Black Hawks are no spring chickens either. Having been
around since 1974, they passed the 40-year mark just this
Indeed, according to
National Defense Magazine
, "the helicopter designs used by the various military branches
are at least 30 to 50 years old." Rounding out the list of
America's most popular combat helicopters, NDM notes that
Boeing's CH-47 Chinook and
's UH-1 "Huey" helo both date from the early 1960s.
The upshot: Many models are expected to reach the end of their
operational lives in the 2030-2040 time frame -- but fear not.
The U.S. Army has a plan to
upgrade the fleet
... for a reported
$100 billion price tag
The Army has a plan
The Army's plan, dubbed "Future Vertical Lift," calls for the
introduction of as many as four new helicopter models over the
next 20-odd years. These will all be designated "Joint
Multi-Role" (JMR) helicopters, and will include:
- A "light" scout helicopter to replace the Textron's OH-58D
- A medium helo, in attack and utility versions, to replace
the Apache and Black Hawk, respectively
- A heavy lift helicopter to replace Boeing's Chinook
- And a new "ultra" helo that, according to the Army, will be
so huge in size that it can substitute for missions that
's fixed-wing C-130 transport plane can perform
In true Army fashion, they've decided to start this process in
the middle -- with the medium JMR.
Introducing the Apache and Black Hawk replacement
Last week, the
it has picked two teams to design demo versions of
helicopters that might fit the bill for its planned medium JMR
helicopter. Boeing and United Technologies' Sikorsky will team up
to build one prototype, and Textron will fly solo on the
Boeing and Sikorsky are calling their version the SB>1
"Defiant," and say it will feature counter-rotating rigid main
rotor blades for lift, boosted by a "pusher propeller" at the
rear to increase the aircraft's ability to accelerate and
decelerate, thus increasing both airspeed and maneuverability.
The Boeing-Sikorsky team expects to have a prototype ready for
first flight by 2017, and it should look a little bit like
United Technologies' Sikorsky X2 technology demonstration
helicopter. Photo: Sikorsky.
Textron, meanwhile, is doubling down on
the popular V-22 Osprey design
(currently built in collaboration with Boeing), to field a
next-generation tiltrotor aircraft that Textron calls the "V-280
Valor." Textron says the Valor will offer the Army "unmatched
speed, range and payload, operational agility, and low speed
maneuverability." Here's a first look at it:
Artist's rendering. Source: Textron.
Who will win?
the No. 1 and No. 4 best-selling helicopters in
-- the Black Hawk transport and the Apache attack helicopter.
They're both strong contenders to win the Army's new FVL
helicopter contract, and are made stronger by their alliance. The
companies boast that their "Defiant will fly faster and
farther than any current medium-lift helicopter today and also
carry a heavier payload."
It will need to, if Boeing and Sikorsky are to have a shot at
winning this competition. The Army says it wants its new
helicopter fleet to cruise at at least 230 knots, and Textron is
already promising them a 280-knot cruising speed from the V-280
Valor -- a 100% improvement over current helicopter speeds.
What does it mean to investors?
With an anticipated servicewide need for as many as 4,000
medium-class FVL helicopters, and a projected price tag of $100
billion to buy them all, the Future Vertical Lift project is a
really big deal for these defense contractors. But as investors,
which one should we want to win?
Let's look at a few numbers.
Textron earns 12.7% profit margins on its Bell business. Bell
is also Textron's single biggest revenue generator, and
absolutely crucial to the success of the company as a whole.
By way of contrast,
data show that United Technologies only earns about 9.5% pre-tax
profits from its Sikorsky helicopter division -- and Sikorsky is
United Technologies' smallest revenue generator. (
It may also be for sale
). Similarly, Boeing earns only a 9.2% operating profit margin
from its military aircraft division -- which is three times
smaller than Boeing's commercial aircraft business.
So the way I look at it, a win on Future Vertical Lift is
worth more to Textron than it would be to either Boeing or
Sikorsky. What's more, since Textron is better at squeezing
profits out of its helicopter business than are its two rivals, a
win by Textron would benefit Textron shareholders more than a win
for Boeing or United Technologies would help their respective
Long story short: This early in the game, it's hard to say who
will build the Army's next top helicopter model, and collect the
$100 billion prize at the end. But there's no doubt which stock
offers the most potential to reward shareholders.
That's Textron by a mile.
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Textron could fly away with this $100 billion contract -- and
that might be a good thing. Source: Textron.
As the Black Hawk Fades to Black, Who Will Build
the U.S. Army's Next $100 Billion Helicopter?
originally appeared on Fool.com.
has no position in any stocks mentioned. The Motley Fool owns
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