In this contract, they will carry out the production and delivery of 99 new V-22 Osprey tilt-rotor aircraft. This contract also includes the option of NAVAIR to order an additional 23 aircraft. The Osprey is a multi-role fighter aircraft built with tilt-rotor technology providing the high-speed equivalent to a fixed-wing airplane. Through the first half of the year, the joint venture delivered more than 200 V-22 aircraft, and it expects to increase this count in the future.
The Boeing Company (NYSE:BA) will look-after the fuselage, all subsystems, and the flight control system, whereas Bell will manage the wings, transmission, rotor system, and engine installation. Both companies are optimistic on their future growth, and this contract enables them to improve their efficiency in building and delivering this aircraft to their present and future customers. With their capabilities, future contracts are expected, which will drive future revenue. It is expected that Textron Inc. (NYSE:TXT) will able to generate overall revenue of around $13 billion this year from $12.24 billion last year, and The Boeing Company (NYSE:BA) may generate revenue of nearly $86 billion this year from $81.7 billion last year.
On August 1, Textron Inc. (NYSE:TXT) won a pair of Army contracts from the Pentagon worth $39.3 million. The company signed two fixed-price contracts. In the first contract, worth $31.7 million, Textron Inc. (NYSE:TXT)’s land and marine systems will supply commando advance armored personnel carriers and related service to the Colombian military. These commando vehicles will be based on Textron Inc. (NYSE:TXT)’s M117 Armored Security Vehicle that is similar to other armored vehicles, and can be heavily loaded with combat devices. The other contract, of $7.7 million, was received by its Bell Helicopter unit to arrange long lead materials, needed for low-rate initial production of “A-Kits armed packages” for Bell OH-58F Kiowa scout helicopters. It is expected that with these contracts Textron Inc. (NYSE:TXT) may generate higher EPS of $1.19 in the second half of 2013 compared to $0.80 in first half.
Conclusion
By collaborating in a joint venture and gaining new contracts, these A&D companies are in a better position to grow their future earnings. Northrop Grumman Corporation (NYSE:NOC) was awarded an upgraded contract from Lockheed and contract extension of DMON to serve the U.S. Air Force. Therefore, it expects further revenue growth.
On the other hand, Textron will benefit from signing new Army contracts. Moreover, by entering the joint venture with The Boeing Company (NYSE:BA) through its subsidiary, Textron and The Boeing Company (NYSE:BA) will strengthen their efficiency to gain future contracts for the V-22, which will enable them to grab future growth opportunities.
Considering these factors, I recommend buying all three stocks.
Madhukar Dubey has no position in any stocks mentioned. The Motley Fool owns shares of Northrop Grumman and Textron. Madhukar is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Aerospace and Defense Companies Battling it Out originally appeared on Fool.com is written by Madhukar Dubey.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
