Industrial conglomerate Textron Inc (NYSE: TXT) hogged the market’s attention yesterday after its subsidiary Bell received a contract from the US Army for the development of a next-generation helicopter. The helicopter will be developed based on Bell’s V-280 Valor tiltrotor aircraft. The announcement marks the end of a year-long battle for the technical advancement that will substitute the US Army’s popular best-in-class multi-mission helicopter, the Black Hawk. The stock of Providence, Rhode Island-based Textron closed at $73.57, up 5.25% or $3.67 from its prior close.
The competing manufacturers participated in the US Army’s “Future Vertical Lift” contest intended to identify an alternate as the Army aims to pull out over 2,000 Black Hawk helicopters (utility grade, UH-60, medium-class) manufactured by Sikorsky for the last five decades. In particular, the US Army was scouting for a helicopter with the ability to carry a dozen troops over 400 nautical miles, and Bell met the criteria.
The company’s CEO, Mitch Snyder, stated that the firm is prepared to “provide troops with the desired speed and range to contend and prevail with the most sophisticated, dependable, and cost-effective long-range offensive weapon system.”
The US Army has revealed that the first phase of the award will be for $232 million. However, the value of the initial batch of helicopters manufactured at a low production rate will be $7.10 billion. In the long run (10+ years), depending on the needs of the US Army and its allies, the contract value could likely go up to $70 billion.
Dough Bush, assistant secretary of the army for acquisition, logistics, and technology, explained the need for a new helicopter and the program under which it is built. Bush pointed out that the well-thought-out, methodical implementation of the FLRAA (Future Long Range Assault Aircraft) program will present the transformative abilities required to empower the combined force, maximize deterrence, and succeed in multi-domain missions.
The Army also provided details of helicopters that failed to match the speed of Bell’s helicopter. Under the FLARAA category, Bell’s tiltrotor aircraft V-280, referred to as “Valor”, recorded speeds of over 340mph (~547km). Its competitor Sikorsky (parent company Lockheed Martin)-Boeing SB-1 “Defiant” recorded speeds of up to 265mph and had two coaxial rotors in addition to a single pusher propeller.
In general, large defense contract announcements give rise to protests from competing parties. In this regard, Bush stated that the institution was fully prepared for such an eventuality, and there is a likelihood of such a complaint being lodged some weeks after the completion of bureaucratic meetings.
The $7 billion defense contract with likely extensions is expected to keep the stock of Textron slightly bullish in the days ahead.
The historical price chart indicates that the stock of Textron is rising after consolidating at 66. The next resistance is anticipated only near 80. Additionally, the stock is trading above its 50-day moving average, while the Chaikin Money Flow indicator is showing a positive reading. Therefore, we anticipate the stock of Textron to remain in an uptrend in the days ahead.
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