Shares of industrial-defense company
are soaring Tuesday. Winning an $80 billion contract will do that.
Monday evening, the U.S. Army announced it had selected
(ticker: TXT) subsidiary Bell Helicopter to supply its new long-range assault helicopter. Textron beat a joint bid from
“We are honored that the U.S. Army has selected the Bell V-280 Valor [helicopter] as its next-generation assault aircraft,” said Textron CEO Scott Donnelly in a news release. “We intend to honor that trust by building a truly remarkable and transformational weapon system to meet the Army’s mission requirements.”
Textron stock was up 8% in premarket trading, at about $75.50. Lockheed shares were off about 0.4% while
stock was up 0.2. The
Dow Jones Industrial Average
futures were flat.
Boeing and Lockheed shares were not reacting to the same extent as Textron because the companies are far larger than Textron. Boeing and Lockheed stock is worth roughly $240 billion combined. A helicopter win or loss doesn’t move the needle as much for those two.
That isn’t the case with Textron. Coming into Tuesday trading, Textron’s market capitalization was about $15 billion. The win is a bigger deal.
The total contract value over the life of the program could be as high as $80 billion, according to Seaport Research Partners analyst Richard Safran. “A positive for the winner,” wrote
in a Monday report. It’s neutral for the loser. “No change in our constructive view of [Lockheed] or [Boeing] as a result of losing the contract.”
Safran doesn’t cover Textron stock. He rates Boeing shares Buy and has a $186 price target for the stock. He rates Lockheed shares Buy and has a $550 price target for the stock.
Bell Helicopter accounted for almost 25% of Textron sales in the third quarter. Rotary aircraft is lumped into a segment that includes mission systems at Lockheed. That unit accounted for about 23% of third-quarter sales.
Boeing reports its defense and space businesses as one unit. It accounted for about 36% of Boeing sales in the third quarter, but the company’s commercial aircraft business is delivering far fewer planes than it did before the Covid-19 pandemic. Investors expect that to change in coming years.
Coming into Tuesday trading, Boeing stock was off about 8% so far this year. Textron stock was down about 9%. Lockheed shares were up about 38%, given a boost from rising geopolitical conflict such as Russia’s war in Ukraine.