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Honeywell Clinches Repair & Overhaul Deal for T55 Engines

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Honeywell International Inc. (HON - Free Report) recently announced that it has clinched an “IDIQ” (Indefinite Delivery, Indefinite Quantity) deal from the U.S. Army. The five-year contract will require the company to provide repair and overhaul services for its advanced T55-GA-714A engines, deployed on CH-47 Chinook helicopters of the U.S. Army.

The company’s share price increased 0.6% yesterday, eventually closing the trading session at $175.36.

Inside the Headlines

Located near Honeywell Aerospace’s headquarters in Phoenix, AZ, the company’s new T55 Repair and Overhaul Center of Excellence facility will align the production of the engine with its repair and overhaul activities. This will also enable Honeywell to improve the operating efficiency of the repair and overhaul team by bringing experts under one platform. The collaboration of the company’s technicians with its engineering team will improve troubleshooting activities along with product updates.

Notably, with this deal, Honeywell will help the U.S. Army to maintain adequate spare engines for its Chinook fleet. This, in turn, will support the Army in maintaining operational readiness for its Chinook helicopters and carrying out missions.

It is worth mentioning here that Honeywell is working on T55 engine modernization program for the Chinook helicopter. The upgraded version of the engine comes with modifications that will allow its operators to keep maintenance costs low, while improving its performance and serviceability. Categorized as a 6,000-horsepower engine, the new variant will be more powerful and use less fuel compared with the existing T55 engine.

Zacks Rank, Price Performance and Estimate Trend

The company, with a $123.1-billion market capitalization, currently carries a Zacks Rank #4 (Sell). Headwinds across the company’s commercial original equipment business on account of lower air transport, slowdown in original equipment build rates and lower business jet demand might affect its revenues. Also, low global air transport flight hours, due to the coronavirus outbreak-led issues, might hurt its commercial aftermarket business.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past three months, the company’s share price has increased 18.4% compared with the industry’s growth of 13.5%.

The Zacks Consensus Estimate for Honeywell’s earnings is pegged at $6.90 for 2020, down 0.3% from the 60-day-ago figure. The consensus estimate for 2021 earnings is pegged at $7.70, unchanged over the same time frame.

Three companies that are in competition with Honeywell are General Electric Company (GE - Free Report) , 3M Company (MMM - Free Report) and Emerson Electric Co. (EMR - Free Report) .

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