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Boeing Secures $282M Deal to Supply Parts for 19 P-8A Jets


The Boeing Company BA recently clinched a modification contract for procuring long lead parts associated with the manufacture of 19 P-8A aircraft of the 10th Lot. Work related to the deal is scheduled to be over by March 2022.

Details of the Deal

Valued at $282.3 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, MD. Per the deal, 10 of the 19 jets will be delivered to the U.S. Navy, five to the government of Norway and four to the U.K. administration.

Majority of the work will be executed in Seattle, WA and the rest at Cambridge, U.K. and various other locations across the United States. Notably, the deal includes 49.7% of the work for the U.S. Navy, 28.7% for the government of Norway and 21.6% for the U.K.

Fiscal 2018 aircraft procurement (Navy) and foreign military sales funds will be utilized to complete the task.

About P-8A Aircraft

Boeing’s P-8A Multi-mission Maritime aircraft, also known as Poseidon, is used for long-range anti-submarine warfare, anti-surface warfare and intelligence as well as surveillance and reconnaissance missions. It is also capable of broad-area littoral operations.

A derivative of the Next-Generation 737-800, the P-8A and its variant for India, the P-8I, delivers superior performance and reliability with an advanced mission system that ensures maximum interoperability in the future battle space.

Our View

Being one of the major players in the defense business, Boeing’s defense segment stands out among peers by virtue of its broadly diversified programs, strong order bookings and order backlog. The company has also reshaped its defense portfolio from time to time.

In particular, among other defense equipment, Boeing’s forte has been combat-proven aircraft. Of late, it has also started developing military aerial refueling and strategic transport aircraft. In fact, with its proven expertise in aerospace programs, the company has been clinching a number of contracts from the Pentagon.

During 2017, the defense segment had backlog worth $50 billion, further reflecting the slew of orders that Boeing enjoys for its varied weaponries. Going ahead, similar backlog figures can be expected at this segment, buoyed by contract wins like the latest one.

Considering the fiscal 2019 defense budget worth $716 billion, proposed by President Trump last month, we expect Boeing to win more contracts from the Pentagon on solid demand for its military aircraft.

Price Movement

In a year’s time, Boeing's shares have surged about 93.8% compared with the broader industry’s gain of 48.1%. The outperformance was primarily led by significant demand for its military jets along with long-term robust demand for its commercial aircraft.

Zacks Rank & Other Stocks to Consider

Boeing sports a Zacks Rank #1 (Strong Buy). Some other stocks worth considering from the same space are Huntington Ingalls Industries, Inc. HII, Lockheed Martin Corp. LMT and General Dynamics Corp. GD. While Huntington Ingalls flaunts a Zacks Rank #1, Lockheed Martin and General Dynamics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls delivered an average positive earnings surprise of 3.85% in the past four quarters. The Zacks Consensus Estimate for 2018 earnings moved up $4.03 over the last 30 days.

Lockheed Martin pulled of an average positive earnings surprise of 4.62% over the last four quarters. The Zacks Consensus Estimate for 2018 earnings climbed 22 cents over the past 30 days.

General Dynamics delivered an average positive earnings surprise of 4.02% for the past four quarters. The Zacks Consensus Estimate for 2018 earnings moved north 55 cents in the last 60 days.

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