Diversified manufacturer Textron Inc. 's TXT business unit Bell Helicopter recently clinched a modification contract from the U.S. Navy. Per the agreement, Textron will manufacture and deliver 14 AH-1Z aircraft from this model's latest lot.
Notably, the company will deliver these aircraft to support the Marine Corps' H-1 upgrade program. Work related to this deal is expected to be over by Feb 2020.
Valued at $423.4 million, this contract was awarded by the Naval Air Systems Command, Patuxent River, MD. Textron will utilize fiscal 2016 and 2017 aircraft procurement funds (Navy) to finance this deal. Work will be executed in Fort Worth and Amarillo, TX.
A Brief Note on AH-1Z Jet & H-1 Program
AH-1Z is one of the world's most advanced combat helicopters. With virtually identical front and rear glass cockpits, fully integrated weapons, avionics and communications systems, this copter was built to meet the expeditionary requirements of U.S. Marine Corps.
United States Marine Corps' (USMC) H-1 program includes the remanufacture of 280 light/attack helicopters in order to extend their service-life till 2020. The basic agenda was to replace two-bladed rotor systems with four bladed ones like AH-1Z to achieve improved performance, reliability and maintenance.
What's Acting in Favor of Textron?
Although Textron's Bell segment continues to be a drag on its top line, the company's geographically diverse network of aircraft, defense & intelligence, industrial and finance businesses negates any specific business risk. It is also worth noting that both the choppers chosen for its H-1 program were of Bell Helicopter, reflecting Textron's supremacy in the space.
The Bell segment's latest offerings like V-247 Vigilant unmanned tiltrotor are expected to hit the market soon. Also, deliveries of the H-1 model are expected to rise this year while the strong foreign initiatives for Textron's copters are likely to boost demand for its products. The aforementioned deal is also a major positive for the company.
Textron outperformed the Zacks categorized Aerospace/Defense industry over the last 12 months. The company's current rate of return is 47.8%, compared to the industry average of 27.2%. The stock's outperformance was driven by Textron's systematic inorganic growth strategy along with its focus on strengthening international presence. The company's industrial revenues increased to $58 million, reflecting synergies from acquired businesses. The stock's performance is in line with that of The Boeing Company BA , General Dynamics Corp. GD and Huntington Ingalls Industries, Inc. HII , which have also surpassed the industry mark.
Textron currently has a Zacks Rank #5 (Strong Sell), largely because of the decline in its current quarter earnings estimates by a penny over the last seven days. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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