Bell Helicopter, a business wing of Textron Inc. (TXT), clinched an $85.0 million contract from the Department of Defense (“DOD”) to offer engineering and support capabilities to two of America’s close allies, Iraq and Taiwan. The Bell helicopters provide civilian assistance and are used for air ambulance, law enforcement and transportation services.
Iraq currently operates 30 of Bell 407 helicopters. Taiwan on the other hand has a manufacturing unit of the UH-1H “Huey” military helicopters licensed under Textron.
Bell helicopters have expanded its geographical footprint in countries like Argentina, Brazil, Chile, Ecuador, Australia, Canada, China, India, Malaysia, Mexico, New Zealand, Nigeria, Thailand, Venezuela and Vietnam.
Prior to this, Textron secured a contract from the Delaware State Police for the supply of Bell 429 aircraft. It also signed a deal with Van Horn Aviation to work jointly on the design, certification and manufacturing of the rotor blades of Bell 212 and 412.
Textron has been constantly upgrading its Bell helicopters to provide more capacity and high-tech features which have made the product line more attractive to foreign clients. This effort will certainly help Textron to create long standing business relationships with its clients.
However, contract order flows have waned owing to across-the-board defense budget cutbacks in the U.S. Textron’s Bell Helicopter business reported a revenue decline of 4.5% year over year to $949.0 million in the first quarter 2013.
We expect the uncertain defense environment to continue given the budget sequestration that came into effect in March under the Budget Control Act of 2012. Moreover, a decreasing backlog of orders further signals a challenging business outlook for Bell helicopter. Given the negative dynamics that are at play we remain bearish on Textron’s performance. Currently, it holds a Zacks Rank #4 (Sell).
There are however other defense and aerospace competitors currently performing well and deserve a look. These are ITT Corporation (ITT), Macquarie Infrastructure Company LLC (MIC) and Honeywell International Inc. (HON). All the above carry a Zacks Rank #2 (Buy).
Based in Providence, R.I., Textron Inc. operates in the aircraft, defense, industrial, and finance businesses globally. The company has a market capitalization of $7.67 billion.
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