Textron Marine & Land Systems, an operating unit of Textron Inc. (TXT), has received a competitive contract to reset 392 M1117 Armored Security Vehicles (“ASV”) from the United States Army Tank-automotive and Armaments Command (“TACOM”). The contract has a base value of $19.8 million. However, depending on the condition of vehicles inducted into the program, it could expand with the exercise of two option years.
There are two one-year contract options. Option year one includes work on an additional 225 ASVs, and option year two involves work on 167 more ASVs. If both options are exercised, the company believes that the reset activities could continue through August 2014. Work will be performed at Textron Marine & Land Systems in New Orleans.
Per the reset program, the company will reverse the effects of combat stress on ASVs. The program will give the army the ability to apply vehicle survivability, safety and mobility enhancements. The program’s main aim is to return these ASVs to fully mission-capable, combat-ready assets, regardless of their current condition.
The reset work has led to the development of a comprehensive set of procedures, tooling and test equipment for M1117 vehicles. These resources, together with personnel that are uniquely qualified, reduce execution risk, and also bring down overall program costs for the Army.
Textron has delivered 3,327 M1117 ASVs to the U.S. Army, as well as related vehicles to military and police forces in Iraq, Colombia and Bulgaria. Currently, the U.S. Army ASV missions include Military Police operations in support of convoy protection, checkpoint security, perimeter security and reconnaissance, as well as Field Artillery Combat Observation and Lasing Teams (“COLT”) with the M1200 Armored Knight configuration.
Textron’s geographically diverse network of aircraft, defense & intelligence, industrial and finance businesses negates any specific business risk. It is increasingly focused on its core manufacturing business and is gradually exiting from its commercial finance business.
However, Textron remains exposed to defense spending cuts. Moreover, a slower recovery in the business jet market could lead to deferrals of orders in its backlog. The company presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.
On October 19, 2011, the company is expected to release its third quarter earnings results. The Zacks Consensus Estimates for third quarter 2011 and fiscal year 2011 are currently at $0.31 per share and $1.09 per share, respectively.
Textron Inc. is a multi-industry company that leverages its global network of aircraft, defense, industrial and finance businesses to provide customers with innovative solutions and services. Textron is known around the world for its powerful brands such as Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, Lycoming, E-Z-GO, Greenlee, and Textron Systems. Some of its main competitors are General Electric Company (GE) and United Technologies Corporation (UTX).
