Textron Inc.’s (NYSE:TXT) Aviation Defense business unit recently secured a $36.2 million modification contract related to T-6C aircraft. The deal is scheduled to be completed by Nov 30, 2018.
Details of the Deal
Awarded by the Air Force Life Cycle Management Center, Wright Patterson Air Force Base, Ohio, this foreign military sales (FMS) deal will support the Argentina Air Force.
Per the terms of the agreement, the company will provide maintenance and pilot training as well as interim contractor support for maintenance of four T-6C jets. Also, Textron will offer supplies and services for the replacement of current training aircraft fleet and the enhancement of the Argentina Air Force surveillance and border security mission.
Work under the agreement will be executed in Wichita, KS. The modification should increase the deal’s not-to-exceed price to $125 million.
A Brief Note on T-6C Aircraft
Textron’s Beechcraft T-6C Texan II military training aircraft is a next generation military trainer, which prepares pilots for real world missions. Each training capability is designed for military aircraft mission experience, providing pilots with the expertise and confidence to achieve success.
The latest T-6C Texan II flight deck features include primary flight display, navigation, engine-indicating and crew-alerting systems as well as programmable mission functions. It also comprises a back-up, all-in-one flight instrument that combines all essential flight cues in one easy-to-read display.
Our View
Textron is globally recognized for popular and valuable brand names, such as Bell Helicopter, Cessna Aircraft, Jacobsen, Kautex, E-Z-GO and Greenlee. Geographically, its diverse network of businesses negates any specific business risk. Meanwhile, the company’s systematic inorganic growth strategy along with its focus on strengthening international presence is expected to boost its results.
In particular, the company’s Aviation segment has been witnessing solid top-line growth buoyed by strong demand for its business jets as well as combat-proven military aircraft. Evidently, the segment witnessed 4.1% revenue growth in the first quarter of 2018, courtesy of high volumes for its jets. Considering the latest contract, we may expect this segment to exhibit similar performance in the upcoming quarters as well.
Moreover, President Trump proposed fiscal 2019 defense budget in February 2018 that provisioned major war-fighting investments of $21.7 billion for aircraft. Such proposed inclusions reflect solid growth prospects for Textron’s Aviation segment, which in turn are likely to boost the company’s profit margin, going ahead.
Price Movement
In a year’s time, Textron has rallied about 40.1% compared with the industry’s 34.5% upside. The outperformance was most probably led by the company’s strong order growth history along with solid delivery figures.
Zacks Rank & Other Stocks to Consider
Textron currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the same space are Northrop Grumman (NYSE:NOC) , Boeing (NYSE:BA) and Wesco Aircraft Holdings (NYSE:WAIR) . While Northrop Grumman sports a Zacks Rank #1 (Strong Buy), Boeing and Wesco Aircraft Holdings carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Northrop Grumman delivered an average positive earnings surprise of 13.87% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved north 5.65% to $16.44 in the last 90 days.
Boeing came up with an average positive earnings surprise of 29.51% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings climbed 62 cents to $14.67 in the last 60 days.
Wesco Aircraft Holdings’ long-term growth rate is pegged at 12%. The Zacks Consensus Estimate for 2018 earnings moved up 10% to 77 cents in the last 90 days.
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