Boeing (BA) Wins $49M Navy Deal For F/A-18 Aircraft Support

The Boeing Co. (NYSE:BA) has won a modification contract to supply 54 F/A-18 retrofit kits to support engineering change proposal 6213R2, “Trailing Edge Flap Retrofit Redesign”. It was awarded by the Naval Air Systems Command, Patuxent River, MD.

Contract Details

Per the contract, valued at $48.9 million, Boeing will provide 48 of the retrofit kits for the Navy and six for the government of Australia.

Work is scheduled to be completed by Feb 2020. Majority of the work will be carried out at St. Louis, MO; while the rest will be performed in Lucerne, Switzerland; Paramount, CA; and Hot Springs, AR. The contract will use fiscal 2017 aircraft procurement (Navy) and foreign military sales funds.

A Brief Note on F/A-18

Boeing’s F/A-18 Super Hornet – a twin-engine, supersonic, all weather multirole fighter jet – is the U.S. Navy’s primary strike and air superiority aircraft. It is capable of landing and taking off from an aircraft carrier. F/A 18E is a single-seat variant of the Super Hornet, which is about 25% larger than its predecessor, the F/A-18C/D but comparatively contains 42% lesser structural parts.

Why Boeing?

Boeing is one of the major players in the defense business and stands out among its peers by virtue of its broadly diversified programs, strong order bookings and solid backlog. In particular, among other defense equipment, the company’s key forte has been combat-proven aircraft. Also, it started developing military aerial refueling and strategic transport aircraft, of late. Notably, with its proven expertise in aerospace programs, Boeing has been clinching a huge number of contracts from the Pentagon for long.

Recently, Boeing secured a foreign military sales (FMS) contract worth $410.9 million to provide 38 Apache (NYSE:APA) aircraft, three Longbow crew trainers and associated spares to the U.K. government. Again, it won a $475 million contract to provide intelligence, surveillance and reconnaissance (ISR) services in support of the Mid-Endurance Unmanned Aircraft Systems (MEUAS) program, at multiple locations across the globe. To this end, we expect the recently won contract to add further impetus to the company’s growth trajectory.

Meanwhile, Trump’s proposal to boost the nation’s defense budget by 10% in 2018 from that of 2016 is likely to benefit defense biggies like Boeing, Lockheed Martin Corp. (NYSE:LMT) , General Dynamics Corp. (NYSE:GD) and Huntington Ingalls Industries, Inc. (NYSE:HII) .

Price Movement

Shares of Boeing have rallied 63% over the last 12 months, outperforming the Zacks categorized Aerospace–Defense industry’s gain of 32.8%. This could be because the company’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.

Zacks Rank

Boeing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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