Textron's ANA Contract Extended

Textron Inc.’s (TXT - Analyst Report) unit Textron Marine & Land Systems has been awarded a contract modification by the U.S. Army Contracting Command to continue providing training and logistics support to the Afghanistan National Army (“ANA”). The cost-plus-fixed-fee contract modification authorizes initial funding of $14.95 million.

This contract was originally awarded in May 2011 and had a potential value of $30.51 million, if all options were exercised. The options included funding for vehicle deprocessing field service representatives, instructors, interpreters and in-theatre management, and other direct costs for an additional one-year period.

Mobile Strike Force Vehicles (“MSFVs”) are upgraded versions of the combat-proven M1117 Armored Security Vehicle (“ASV”), and are configured with Enhanced Survivability capability. These vehicles have V-shaped hull design and provide improved blast protection and mine-resistant capability along with strong ambush-protected (“MRAP”) power.

Earlier in June 2011, Textron received a contract, worth $257 million including initial funding of $125.9 million, from the U.S. Army Contracting Command to manufacture up to 440 Medium ASVs for the ANA. The company has already started full-rate production of 240 MSFVs last year and the first MSFVs arrived in Afghanistan in February. The option contract adds 200 more vehicles and includes the company’s last contract with the U.S. Army Contracting Command to supply 71 MSFVs to the ANA.

We view Textron Inc. as an organization with a geographically diverse network of aircraft, defense & intelligence, industrial and finance businesses. Currently, it is focusing on its core manufacturing business and making a gradual exit from its commercial finance business.

But at the same time, we are skeptical about lower backlog at Cessna, the rate of recovery of the business jet market, and defense spending cutbacks.

Textron Inc. currently retains a Zacks #4 Rank, which translates into a short-term Sell rating. Over the longer run, we are Neutral on the company. The company competes with General Electric Company (GE - Analyst Report) and United Technologies Corporation (UTX - Analyst Report).

Providence, Rhode Island-based Textron Inc. is a global multi-industry company that manufactures aircraft, automotive engine components, and industrial tools. It is also a provider of solutions and services for aircraft, fastening systems, and industrial products and components.