Textron Wins $30M Beechcraft King Air 350 Maintenance Deal

Textron Inc (NYSE:TXT) announced that its Aviation Defense segment has been awarded a $30-million contract for maintenance training of the Beechcraft King Air 350. This deal is part of foreign military sales (“FMS”) for Iraq. Work related to the contract will be carried out at the Martyr Mohammed Ali Air Base, Iraq. Operations are expected to be concluded by Sep 20, 2020. An amount of $9 million from the FMS fund will be obligated at the time of the award.

Originally developed by Beechcraft, King Air 350 has more payload capability and range. It is designed for a quieter interior with standard Wi-Fi and Pro Line Fusion avionics with full touch-screen simplicity. The aircraft can fly at an altitude of 35,000 feet, thanks to its pressurized cabin and can take off and land on unimproved fields too.

Importance of Foreign Military Sales

Foreign military sales became an important tool of generating revenue for the U.S. defense contractors, in addition to the orders received from the different verticals of U.S. Defense. Defense contracts from the U.S. allies helped the contractors maintain their top line during tough times. Moreover, when these contracts are carried on in the right manner, they help in strengthening the regional security, strengthen alliances, lighten United States' warfighting burden, improve the trade balance and create jobs.

The Defense Contract Management Agency regulates the FMS contracts. The purchasers place the orders directly to the contractors. Instead, the agency acts as an intermediary and handles the procurement, logistics and delivery and often providing product support, training and infrastructure construction.

What is Boosting Textron?

Textron is globally recognized for popular and valuable brand names, such as Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, E-Z-GO and Greenlee. Textron’s geographically diverse network of businesses negates any specific business risk. Its systematic inorganic growth strategy, along with its focus on strengthening international presence, is helping it in boosting results.

The company has adopted the policy of spreading its operations in new fields with strategic acquisitions. During the first quarter, Textron completed its earlier announced acquisition of Arctic Cat, a leader in the recreational vehicle industry, for $247 million which expanded its presence in the power-sports segment and utility vehicle market. At the end of 2016, the company completed the acquisition of Premier and SAFEAERO, manufacturers of aircraft de-icing equipment. These expansions are likely to contribute to the company’s overall growth in revenue, earnings and cash.

The company and its peers, Northrop Grumman Corporation (NYSE:NOC) , Lockheed Martin Corporation (NYSE:LMT) , The Boeing Company (NYSE:BA) etc., are also expected to gain from the recently passed fiscal 2018 defense policy bill worth $700 billion by the U.S. Senate. This bill provides about $640 billion for Pentagon’s main operations like buying weapons and paying the troops. The rest $60 billion for Overseas Contingency Operations will be utilized to fund the conflicts in Afghanistan, Iraq, Syria and elsewhere.

Price Movement

Shares of Textron have gained 10.5% during the last month outperforming the industry’s gain of 4.6% during the same time.

This outperformance could be attributed to the systematic inorganic growth strategy along with its focus on strengthening international presence, which has boosted Textron’s growth trajectory.

Zacks Rank

Textron currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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