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Boeing (BA) Wins $677M Navy Deal for F/A-18E/F Aircraft


Aerospace giant, The Boeing Co. BA, has secured a modification contract to offer full-rate production of six Lot 41 F/A-18E and eight F/A-18F aircraft. The terms of the deal includes delivery of these aircraft as well.

Details of the Deal

Valued at $676.6 million, the contract has been awarded by the Naval Air Systems Command, Patuxent River, MD.

The deal will utilize fiscal 2017 aircraft procurement (Navy) funds to complete the task, which is scheduled to be over by February 2017. While majority of the work will be carried out in El Segundo, CA, the rest will be executed in St. Louis, MS and various other locations across the United States.

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. Also, it is capable of landing and taking off from an aircraft carrier.

A single-seat variant of the Super Hornet, F/A 18E, 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. In particular, the company’s key forte has been combat-proven aircraft compared with the other defense equipments. Additionally, with its proven expertise in aerospace programs, this aerospace giant has been clinching a huge number of contracts from the Pentagon for long.

Evidently, Boeing won the Aerospace Systems Air Platform Technology Research program contract last week, from the U.S. Air Force. The deal came up with a ceiling value of $499 million. Per the contract, the company will provide quality research for affordable, revolutionary capabilities for the warfighter.

Earlier, in August, the company clinched a contract worth $323.5 million, to supply spare parts of F/A-18 A-F and F/A-18 aircraft from the Defense Logistics Agency Aviation. To this end, we expect the recently won contract to add further impetus to the company’s growth trajectory.

Meanwhile, the current budget scenario seems favorable for the defense industry, which buoys investors’ optimism this industry’s bellwethers like Boeing. In July, the U.S. House of Representatives passed the 2018 defense policy bill, reflecting an expenditure level of $696 billion. Markedly, the figure exceeded President Trump’s fiscal 2018 defense budget request proposed in March, 2017. If enacted, this budgetary amendment is expected to immensely boost Boeing’s as well as other defense majors’ business growth, going forward.

Price Movement

Shares of Boeing have surged 91.9% in the last 12 months, outperforming the industry’s gain of 41.4%. The improvement might have been 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.

Also, the company poses strong competition to its peers like Lockheed Martin Corp. LMT, General Dynamics Corporation GD and Huntington Ingalls Industries, Inc. HII.

Zacks Rank

Boeing currently holds 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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