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Bell-Boeing Joint Venture Wins $137M Navy Contract for V-22

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Bell-Boeing – a strategic alliance between Boeing Co. (BA - Free Report) and Textron Inc.’s (TXT - Free Report) wholly owned subsidiary, Bell Helicopter – won a $138.6 million modification contract from the U.S. Navy for the V-22 aircraft. The contract was awarded by the Naval Air Systems Command, Patuxent River, MA.

Details of the Deal

Per the modification, the joint venture (“JV”) will procure non-recurring engineering for the development, qualification test, incorporation, airworthiness validation, flight test demonstration, verification and incorporation of the government of Japan (GOJ) configuration into the MV-22B Block C aircraft, and the MV-22 containerized flight training device.

Moreover, the JV will procure kits for the government of Japan’s unique configuration.

Work is scheduled to be completed by Dec 2019. The company will execute the majority of the work in Philadelphia, PA, while the rest will be carried out across the states of Texas, Virginia, Arizona, Alabama, Missouri, California among other locations in the U.S. as well as in other countries including Japan. The contract will use foreign military sales funds.

A Brief Note on V-22

Formed in 1981, the Bell-Boeing JV’s primary product is V-22 Osprey – a joint service multirole combat aircraft that utilizes tiltrotor technology to combine the vertical performance of a helicopter with the speed and range of a fixed-wing aircraft. Notably, this aircraft can take off, land and hover like a helicopter and once airborne, it can convert into a turboprop airplane capable of high-speed, high-altitude flight. The V-22 aircraft was built by Boeing, in collaboration with Bell Helicopter. It has the capacity of 24 combat troops, or up to 20,000 pounds of internal cargo or 15,000 pounds of external cargo.

MV-22 is a variant of the V-22 Osprey that is supplied to the U.S. Marine Corps by Boeing.

Our View

Following a series of budget cuts in the preceding years, a rapid rise in terror attacks compelled the U.S. government to expand its defense budget substantially in 2016, which has led to the modernization of tactical equipment and modification of the existing ones. The widespread rise of ISIS has added to this nation’s fears as it has been at the top of the organization’s target list.

Naturally, Pentagon has been allocating substantial funds to the defense contractors for enhanced security of the country. With no improvement expected in the geopolitical situation at present, defense majors like Boeing and Textron, to name a few, are poised to gain substantially.

Price Movement

Shares of Boeing have gained 26.4% over the last 12 months, outperforming the Zacks categorized Aerospace–Defense industry’s gain of 21.6%. This could be because the company’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings-accretive acquisitions.



Zacks Rank & Key Picks

Both Boeing and Textron carry a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the same space include Lockheed Martin Corporation (LMT - Free Report) and Northrop Grumman Corp. (NOC - Free Report) .

Lockheed’s earnings beat estimates by 26.2% in the last reported quarter. The Zacks Consensus Estimate for 2017 moved up by 1.2% in the last 60 days to $12.63. Lockheed Martin sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop carries a Zacks Rank #2 (Buy). On an average, Northrop has delivered a positive earnings surprise of 7.47% in the last reported quarter. The company’s 2017 earnings estimates increased 1.3% over the last 7 days.

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