Pentagon Grants Honeywell a $165 Million Contract Extension

The Department of Defense awarded Honeywell (NYSE: HON  ) a sizable supply contract Tuesday.

The Defense Logistics Agency, Aviation, extended the term of Honeywell's three-year base contract for the supply of consumable and depot-level reparable spare parts for multiple weapons systems by an additional 18 months. The contract also has three, three-year option periods. One effect of this extension is to add $165.1 million to the indefinite-delivery requirements contract. Another is to extend the completion date for Honeywell's performance to Nov. 6, 2014.

Weapons systems such as the ones covered in this contract generally accrue to Honeywell's Aerospace division, which at $12 billion in annual business, accounts for roughly $0.32 out of every $1 Honeywell brings in as revenue. As such, Tuesday's contract win could make up close to 1.4% of the Aerospace division's revenues over the next year -- and about 0.4% of Honeywell's overall sales for the year.

Today, the first trading day after the contract was announced, Honeywell shares are up 0.5% as of this writing, trading around $77.30.


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