Bell-Boeing Wins $367M Deal To Build CMV-22B & MV-22B Jets
Zacks Investment Research | Dec 30, 2018 09:11PM ET
Bell-Boeing, a joint venture (JV) between The Boeing Company (NYSE:BA) and Bell Helicopter — a unit of Textron Inc. (NYSE:TXT) , recently secured a modification contract pertaining to the CMV-22B and MV-22B variants of the V-22 family of tiltrotors. Work related to the deal is scheduled to be completed by October 2023.
Valued at $366.6 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Per the terms of the agreement, the JV will manufacture and deliver three CMV-22B jets to the U.S. Navy and two MV-22B jets to the Marine Corps. Majority of the task will be carried out in Fort Worth and Amarillo, TX as well as Ridley Park, PA.
A Brief Note on V-22 Jets
Bell-Boeing’s primary product, V-22 Osprey, is a family of multi-mission, tiltrotor military aircraft with both vertical as well as short takeoff and landing capabilities. It is designed to combine the functionality of a conventional helicopter with the long-range, high-speed cruise performance of a turboprop aircraft. This military aircraft has the capacity to carry 24 combat troops or up to 20,000 pounds of internal cargo or 15,000 pounds of external cargo. Notably, the CMV-22B and MV-22B are different variants of the V-22 Osprey.
Apart from its wide usage in the domestic front, this family of tiltrotors have been deployed in numerous missions overseas including casualty evacuation, tactical recovery of aircraft and personnel, humanitarian assistance/disaster relief, resupply, VIP transport and theater security cooperation.
Our View
Increasing terrorist attacks across the globe along with the widespread rise of ISIS has compelled nations to strengthen arsenal and bump up their defense budget in recent times. The present U.S. administration is also in favor of raising defense spending in contrast to the budget sequestration enacted by the prior government.
The fiscal 2019 defense budget worth $716 billion further supports this fact. The financial plan includes $617.1 billion as base budget, highlighting a 17.8% increase from the 2018 CR level. As a result, defense majors like Boeing and Textron are expected to receive an increased flow of contracts from the Pentagon for their high-end defense equipment. In fact, the latest contract win by Bell-Boeing mirrors the same.
We expect such contract inflows to further boost the performances of these two defense contractors and bolster their respective profit margins in the near term.
Price Performance
In a year’s time, shares of Boeing have gained about 9.5% against the Zacks Investment Research
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