The Boeing Company (BA - Free Report) and Bell Helicopter, a unit of Textron Inc. (TXT - Free Report) , have received a five-year modification contract worth $4.9 billion for the manufacture of 99 V-22 Osprey tiltrotor aircraft.
Specifically, Bell-Boeing Joint Project Office will produce 92 MV-22 Osprey aircraft for the U.S. Marine Corps, and seven carrier-variant CV-22s for the U.S. Navy. The contract work is expected to be completed by Sep 2019.
Taking into account the $1.4 billion preliminary contract that the joint venture received in Dec 2012, the value of the contract comes to $6.3 billion. In Dec 2012, the joint venture had received a contract to produce 21 V-22 Osprey.
Boeing, in collaboration with Bell Helicopter, has built the V-22 aircraft. The V-22 Osprey is a joint service multi-role combat aircraft that can fly as fast as a plane and land like a helicopter. The aircraft has the capacity to carry 24 combat troops, or up to 20,000 pounds of internal cargo or 15,000 pounds of external cargo.
Diversified network of both the companies negates any specific business risk. Going forward, Textron’s diversified presence across commercial, manufacturing and industrial products, as well as financing operations and strong demand for Boeing’s defense products would keep them well-positioned.
However, the adverse effects of sequestration cannot be ignored. In fact, in April, the budget cuts from sequestration have reduced the number of contracts awarded by the Department of Defense to major defense contractors. Defense contractors, including Boeing, have not been spared from the negative impacts of sequestration.
Even Lockheed Martin Corp. (LMT - Free Report) and Huntington Ingalls Industries Inc. (HII - Free Report) are part of this $37 billion sequestration cut made due to the automatic spending reduction that took effect from Mar 1, 2013. In Feb 2013, the government had announced $1.2 trillion in automatic cuts by 2021. In accordance to sequestration, funding for V-22s has experienced an $18 million reduction.
Boeing presently retains a Zacks Rank #3 (Hold) while Textron carries a Zacks Rank #4 (Sell).