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Bell-Boeing JV Wins $18M Support Contract for V-22 Aircraft

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Bell-Boeing, a joint venture between The Boeing Company (BA - Free Report) and Bell Helicopter, an unit of Textron Inc. (TXT - Free Report) , recently won a contract for providing technical analysis, engineering and integration services to support the V-22 tiltrotor military aircraft platform.

Details of the Deal

The contract, worth $18 million, was awarded by the Naval Air Systems Command, Patuxent River, MD. Funds will be allotted on issuance of individual task orders.

Work will be carried out in Fort Worth, TX, and Philadelphia, PA; and is expected to be complete by December 2022.

A Brief Note on V-22 Jets

Bell-Boeing’s primary product — V-22 Osprey — is a multi-mission, tiltrotor military aircraft with both vertical as well as short takeoff and landing capabilities. It is designed to combine the functionality of a conventional helicopter with the long-range, high-speed cruise performance of a turboprop aircraft. It has the capacity to carry 24 combat troops or up to 20,000 pounds of internal cargo or 15,000 pounds of external cargo.

The V-22 tiltrotor has been deployed in numerous missions around the world, including casualty evacuation, tactical recovery of aircraft and personnel, humanitarian assistance/disaster relief, resupply, VIP transport and theater security cooperation.

Our View

A rapid rise in terror attacks along with the widespread rise of ISIS has compelled nations across the globe to strengthen their arsenal and bump up their defense budget. The present U.S. administration is also in favor of raising the defense spending in contrast to the budget sequestration enacted by the prior government.

Reflective of this, the U.S. Senate approved a fiscal 2018 defense budget of $700 billion in September. Thus, it is obvious that defense majors like Boeing and Textron will receive an increased flow of contracts from the Pentagon, for their high-end defense equipments. The latest contract win by Bell-Boeing mirrors the same.

Last month, the V-22 fleet of tiltrotor aircraft was announced to have achieved the milestone of 400,000 flight hours. This reflects strong demand for the aircraft and more contracts for this product can be expected in the days ahead. Such contract wins will certainly drive revenues for Textron and Boeing.

Price Movement

Boeing’s stock has gained about 80.5% in a year’s time, surpassing the broader industry’s 29.3%. The outperformance was driven by the company’s record backlog supporting revenue growth, increased orders for commercial airplanes and expanded presence in domestic as well as international markets.

 


 

Meanwhile, Textron's stock has gained around 11.4% in a year, lagging the industry’s rally. The underperformance has been led by excessive capital expenditure incurred by the company, along with its declining profit margins.

Zacks Rank & Key Picks

Boeing currently carries a Zacks Rank #3 (Hold), while Textron has a Zacks Rank #4 (Sell). A few better-ranked stocks in the same space are Huntington Ingalls Industries, Inc. (HII - Free Report) and Leidos Holdings, Inc. (LDOS - Free Report) .

Huntington Ingalls, carrying a Zacks Rank #2 (Buy), boasts a long-term earnings growth of 19.4%. On average, the company posted a positive earnings surprise of 14.22% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Leidos Holdings, also carrying a Zacks Rank #2, boasts a long-term earnings growth of 17.2%. On average, the company posted a positive earnings surprise of 14.81% in the last four quarters.

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