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Bell-Boeing JV Wins $379M Deal to Aid V-22 Tiltrotor Program

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Bell-Boeing, a joint venture (JV) between The Boeing Company (BA - Free Report) and Bell Helicopter — a unit of Textron Inc. (TXT - Free Report) — recently secured a contract to offer maintenance, repair and consumable material support for the V-22 platform. Work related to the deal is scheduled to be completed by Nov 20, 2024.

Valued at $379.4 million, the contract was awarded by the Defense Logistics Agency Aviation, Philadelphia, PA. The deal will serve the U.S. Navy, Air Force and Marine Corps. The JV will carry out the tasks in the states of Maryland, Texas and Pennsylvania.

Attributes of V-22 Jets

Bell-Boeing’s primary product, V-22 Osprey, is a family of 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 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.

Apart from its wide usage domestically, this family of tiltrotors has been deployed in numerous missions overseas including casualty evacuation, tactical recovery of aircraft and personnel, humanitarian assistance/disaster relief, resupply, VIP transport along with theater security cooperation. Notably, MV-22 and CV-22 are two variants of the V-22 family of jets.

Our View

Increasing terrorist attacks globally and widespread rise of ISIS have compelled nations to strengthen arsenal and bump up the defense budget in recent times. The present U.S. administration is also in favor of raising defense spending in contrast to the budget sequestration enacted by the prior government.

The U.S. fiscal 2019 defense budget worth $718 billion further supports this fact. The financial plan represented the largest annual amount requested over the five-year period and reflected 4.9% growth over fiscal 2019’s enacted defense budget. Considering such a bountiful spending provision, defense majors like Boeing and Textron are expected to receive increased flow of contracts from the Pentagon for their high-end defenseproducts. In fact, the latest contract win by Bell-Boeing mirrors the same.

We expect such contract inflows to further boost the performance of these two defense contractors and bolster their respective profit margins in the near term.

Price Performance

In a year’s time, shares of Boeing have gained about 15.5% compared with the industry’s 21% growth.

Meanwhile, Textron has lost 14.8% against the industry’s growth in the same time frame.

Zacks Rank & Stocks to Consider 

While Boeing currently carries a Zacks Rank #3 (Hold), Textron has a Zacks Rank #4 (Sell).

A few better-ranked stocks in the same industry are L3Harris Technologies Inc. (LHX - Free Report) and Leidos Holdings (LDOS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

L3Harris Technologies delivered an average positive earnings surprise of 5.02% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 3.3% over the past 90 days.

Leidos Holdings delivered average positive earnings surprise of 8.93% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved up 5.5% over the past 90 days.

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