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Bell-Boeing JV Wins $23M Deal to Support V-22 Test Aircraft

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Bell-Boeing, a joint venture between The Boeing Company BA and Bell Helicopter, unit of Textron Inc. TXT , recently won a contract to offer support to ongoing flight tests and evaluation of the V-22 test aircraft. Work related to the deal is scheduled to be over by December 2018.

Details of the Deal

The contract, worth $23.3 million, was awarded by the Naval Air Systems Command, Patuxent River, Maryland.

Work will be carried out in Naval Air Station Patuxent River, Marylandand Marine Corps Air Station Yuma, Arizona. Fiscal 2018 aircraft procurement and fiscal 2018 research, development, test and evaluation (Navy) funds will be utilized to complete the work.

A Brief Note on V-22 Jets

Bell-Boeing's primary product - V-22 Osprey - is a multi-mission, tiltrotor military aircraft with both vertical as well as short takeoff and landing capabilities. It is designed to combine the functionality of a conventional helicopter with the long-range, high-speed cruise performance of a turboprop aircraft. It has the capacity to carry 24 combat troops or up to 20,000 pounds of internal cargo or 15,000 pounds of external cargo.

The V-22 tiltrotor has been deployed in numerous missions around the world, including casualty evacuation, tactical recovery of aircraft and personnel, humanitarian assistance/disaster relief, resupply, VIP transport and theater security cooperation.

Our View

A rapid rise in terror attacks along with the widespread rise of ISIS has compelled nations across the globe to strengthen their arsenal and bump up their defense budget. The present U.S. administration is also in favor of raising the defense spending in contrast to the budget sequestration enacted by the prior government.

The fiscal 2018 defense bill policy worth $700 billion, approved by the U.S. Senate last September, supports this fact. Thus, it is obvious that defense majors like Boeing and Textron will receive an increased flow of contracts from the Pentagon for their high-end defense equipment. The latest contract win by Bell-Boeing mirrors the same.

Moreover, in November 2017, the V-22 fleet of tiltrotor aircraft was announced to have achieved the milestone of 400,000 flight hours. This reflects strong demand for the aircraft and more contracts for this product can be expected in the days ahead. Such contract wins will certainly drive revenues for Textron and Boeing.

Price Movement

Boeing's stock has gained about 86.9% in a year's time, surpassing the broader industry 's 37.2%. The outperformance was driven by the company's record backlog supporting revenue growth, increased orders for commercial airplanes and expanded presence in domestic as well as international markets.

Meanwhile, Textron's stock has gained around 14.6% in a year, lagging the industry's rally. The underperformance has been led by excessive capital expenditure incurred by the company along with declining profit margins.

Zacks Rank & Key Picks

Boeing carries a Zacks Rank #3 (Hold), while Textron has a Zacks Rank #4 (Sell). Investors can consider better-ranked stocks in the same industry such as Huntington Ingalls Industries, Inc. HII and Leidos Holdings, Inc. LDOS , both of which carry Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Huntington Ingalls posted positive average earnings surprise of 14.22% in the trailing four quarters. Additionally, its current-year estimates have increased by 56 cents to $12.09 per share in the last 60 days.

Leidos Holdings posted positive average earnings surprise of 14.81% in the last four quarters. Additionally, its current-year estimates have increased by 6 cents to $3.70 per share in the last 60 days.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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