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Textron's Unit Secures $499M Contract From U.S. Air Force

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AAI Corporation, an operating unit of Textron Systems, a Textron Inc. (TXT - Free Report) company, announced that it is one of the six companies to receive the Aerospace Systems Air Platform Technology Research program contract from the U.S. Air Force. In fact, it is the fourth company to receive this award from Pentagon. The contract has a ceiling value of $499 million.

Contract Details

Per the deal, AAI Corp will be responsible for providing quality research to Air Force in developing, demonstrating, integrating and transitioning new air vehicle technologies and systems. Such technology developments, in turn, will offer cost-efficient air vehicle platforms that will accurately deliver weapons and cargo worldwide.

Work is anticipated to be completed by Aug 31, 2025 and will be carried out in Hunt Valley, MD. The contract will use fiscal 2017 research and development funds.

Why Textron?

AAI Corp.’s multi-mission capable unmanned aircraft, along with interoperable command and control technologies provide critical situational awareness and actionable intelligence for users, globally.

Headquartered in Wilmington, MA, Textron Systems is known for its unmanned aircraft systems, advanced marine craft, armored vehicles, intelligent battlefield and surveillance systems, intelligence software solutions, precision smart weapons, piston engines, test and training systems, and total life cycle sustainment and operational services.

Realizing the immense opportunity in the military aircraft space, the company continues to make consistent effort to usher in new products, to capture increased market shares. In this regard, at Paris Air Show in June 2017, Textron’s unmanned systems business unveiled its next-generation platform with the Night Warden tactical unmanned aircraft system. Markedly, the Night Warden system comes with enhanced capabilities and runway independence.

With rising geopolitical tensions across the globe, Textron continues to witness increased demand for its combat-proven military aircraft and associated systems from the U.S. government as well as allied nations. The most recent contract mentioned above substantiates this fact. More such contracts can be expected in near future, thanks to increasing global security threats, which in turn might significantly boost Textron’s revenue growth rate. 

Price Movement

Textron has underperformed the broader industry in the last 12 months. The company’s current rate of return is 16.8% compared with the industry average of 39.8%.

This might have been led by the company’s aviation business, which continues to exhibit dismal performance on account of lower military and commercial turboprop volumes. Moreover, management expects Textron’s weakness in the global commercial helicopter market may affect segment revenues in 2017, which also added to this stock’s concerns.

Further, the stock’s performance lagged behind that of The Boeing Company (BA - Free Report) , Airbus Group SE (EADSY - Free Report) and Leidos Holdings, Inc. (LDOS - Free Report) , which have surpassed the industry mark in last 12 months.

Zacks Rank

Textron currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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