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Bell-Boeing JV Wins Navy Contract to Upgrade V-22 Aircraft

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Bell-Boeing, a joint venture (JV) between The Boeing Company (BA - Free Report) and Bell Helicopter — unit of Textron Inc. (TXT - Free Report) — recently won a delivery order in relation to V-22 aircraft. Work related to the deal is scheduled to be over by July 2020.

Details of the Deal

Valued at $47.4 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Per the terms of the deal, the JV will procure non-recurring engineering, production and supportability. These procurements will facilitate the incorporation of optimized wiring and structural improvements on the nacelle into the V-22 production line and via forced retrofit at the depot level of maintenance for previously delivered V-22 aircraft. 

The effort will address all non-recurring activities through the critical design review, to include the delivery, installation, validation and any defined testing of one nacelle ship set. Majority of the work will be carried out in Fort Worth, TX.

Fiscal 2018 aircraft procurement (Navy and Air Force) funds will be utilized to complete the project. Notably, the deal includes 85% of work for the U.S. Navy and 15% for the Air Force.

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. This military 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.

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 increase in terror attacks along with the widespread rise of ISIS has compelled nations across the globe to strengthen arsenal and bump up the 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.

The fiscal 2019 defense budget proposal worth $716 billion further supports this fact. 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 equipment. In fact, the latest contract win by Bell-Boeing mirrors the same.

Price Movement

In a year’s time, Boeing has soared about 95.7%, outperforming the broader industry’s rally of 42.9%. This impressive performance 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 has surged around 46.6% in a year, ahead of the industry’s rally. This upside can be attributed to the company’s strong order growth along with its systematic inorganic growth strategy.

Zacks Rank & Other Stocks to Consider    

While Boeing has a Zacks Rank #2 (Buy), Textron carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are AeroVironment (AVAV - Free Report) and Kratos Defense & Security Solutions (KTOS - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AeroVironment delivered an average positive earnings surprise of 147.43% in the trailing four quarters. The Zacks Consensus Estimate for fiscal 2019 earnings moved north 10 cents to $1.00 in the past 60 days.

Kratos Defense pulled off an average positive earnings surprise of 9.52% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings climbed 2 cents to 19 cents in the past 60 days.
 

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