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Boeing (BA) Secures $93M Air Force Deal for AWACS Support

Zacks

The Boeing Co. BA has won a contract to provide sustainment engineering and technical support to E-3 Airborne Warning and Control System (AWACS). It was awarded by the Air Force Life Cycle Management Center, Tinker Air Force Base, OK.

Contract Details

The contract, valued at $92.9 million, has a five-year ordering period. Apart from offering support to the E-3 AWACS division, the deal also includes generation of technical requirements for the U.S. Air Force (USAF), Japanese Air Self Defense Force (JASDF), North Atlantic Treaty Organization (NATO), Royal Saudi Air Force (RSAF), the UK, and the French Republic (FR).

The deal covers foreign military sales (FMS) to JASDF, NATO, RSAF, the UK, and the FR.

The work is scheduled to be completed by Jul 9, 2022, and will be carried out at Oklahoma City, OK. The contract will use fiscal 2017 operations and maintenance funds.

A Brief Note on AWACS

Initiated in 1977, Boeing’s AWACS was derived from the company's 707 model. Boeing’s 707-320B and the E-3 airframe based system deals with command and control, and surveillance and communications activities for strategic and defensive missions. Notably, it has been used by USAF, JASDF, NATO, RSAF, the UK, and the FR.

Why Boeing?

Boeing is one of the major players in the defense business and emerges by virtue of its broadly diversified programs, strong order bookings and solid backlog among its peers. In particular, amid other defense equipment, the company’s key forte has been its combat-proven aircraft. Also, it has 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 FMS contract worth $410.9 million to provide 38 Apache aircraft, three Longbow crew trainers and associated spares to the UK 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. Moving ahead, we expect these recently won contracts to add 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. LMT, General Dynamics Corp. GD and Huntington Ingalls Industries, Inc. HII.

Price Movement

Shares of Boeing have rallied 55.9% in the last 12 months, outperforming the Zacks categorized Aerospace–Defense industry’s gain of 26.3%. This could be because of the company’s strong balance sheet and cash flows that provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.



Zacks Rank

Boeing currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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