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Textron (NYSE:TXT) announced Tuesday that its subsidiary, Bell Textron Inc , has been awarded the development contract for the U.S. Army’s Future Long-Range Assault Aircraft (FLRAA) program.
Textron shares jumped on the news, currently trading over 6% higher on the day.
The award is based on Bell’s V-280 Valor tiltrotor, which was developed as part of the Joint Multi-Role Technology Demonstrator program that started in 2013.
The company said the initial contract refines the weapon system design, sustainment, digital enterprise, manufacturing, systems integration, flight-testing, and airworthiness qualification.
Following the announcement, analysts at Wolfe Research, Goldman Sachs, and JPMorgan commented on the deal.
Wolfe Research analysts said the award of the contract “ends one of the largest competitive U.S. defense program contests in the last decade.”
“We think market odds were heavily skewed to TXT, but LMT‘s recent comments regarding confidence in their offering were certainly providing some pause into the decision. The win is more important for TXT than LMT at a stock level and it removes the “melting ice cube” narrative risk that TXT’s $2B military helo portfolio at Bell would have been under with a loss,” wrote the analysts.
Goldman Sachs analysts told investors in a note that the program will “drive meaningful contributions to near and long-term earnings growth, as it is quite large relative to the size of Bell Helicopter today.”
“It is a meaningful positive catalyst for Textron given that size, but also because legacy Bell military programs are ramping down, and it is a visible long-term revenue stream compared to some of the more cyclical segments elsewhere in the company. We remain Buy rated on TXT and the stock is on the Conviction List,” wrote the analysts.
JPMorgan analysts said long-term, the program should be “transformational for Bell and a win here was critical for Textron. Also, it may create more strategic opportunities for TXT to manage its portfolio.”
