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Boeing, Lion Air Group Ink $6.2B Deal for 50 737 MAX 10 Jets


The Boeing Company BA recently secured a contract to deliver 50 new 737 MAX 10 aircraft to the Lion Air Group. The deal, worth $6.24 billion at current list prices, will become the airlines’ largest order of the MAX 10 variant to date.

The order is expected to enable Lion Group optimize its network and increase profitability.

A Brief Note on 737 MAX

Boeing’s 737 MAX family of airplanes incorporate the latest CFM International LEAP-1B engines, Advanced Technology winglets, the Boeing Sky Interior and large flight deck displays. These features allow this family of jets to offer the greatest flexibility, reliability and efficiency in in the single-aisle market.

Notably, the company believes that its 737 MAX 10 model will be the airlines' most profitable single-aisle airplane, offering the lowest seat costs ever.

Boeing and Lion Group

Lion Air, one of Boeing’s largest customers, was the first airline globally to put Boeing’s 737 MAX 8 jets into service and take delivery of the smaller 737 MAX 9 for expanding its international routes, earlier this year. Boeing currently delivers 737 Max and Next Generation 737 jets to the Jakarta-based airline company.

Our View

Boeing’s commercial business has been gaining traction in recent days, in the form of huge inflow of jet orders from airlines worldwide. The company recently received an order worth $12 billion to deliver 47 787-9 Dreamliners to American Airlines. A week back it also received orders worth $8.8 billion for 75 737 MAX Airplanes from Jet Airways.

In 2017, Boeing’s revenues from its Commercial Airplanes were $56.7 billion, majorly driven by record 763 deliveries, including the delivery of the first 74 737 MAX airplanes. Key milestones for the commercial airplane segment included the successful launch of the 737 MAX 10 and the transition of 737 production lines while increasing production of 47 airplanes per month. Boeing further anticipates the 737 MAX to account for between 40% and 45% of its total 737 deliveries in 2018.

Moreover, on the commercial front, Boeing estimates demand for 41,030 new planes, worth $6.1 trillion in the next two decades. The company expects cost effective single-aisle jets to be the major demand driver, accounting for 72% of the total projection along with widebody jets, comprising over 20%. Recently, the company announced first-quarter delivery numbers that reflect 9% growth in its commercial shipments, primarily backed by higher demand for 737 jets. These developments allow us to expect that Boeing will continue to maintaining its position as one of the largest aerospace contractors worldwide and is likely to deliver similar performance in coming quarters.

Price Movement

Boeing’s stock has rallied about 86% in a year, compared with the broader industry’s gain of 46.2%. The outperformance was primarily led by the robust worldwide demand for its commercial aircraft and for its military jets.

Zacks Rank & Other Stocks to Consider

Boeing currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the same sector are Huntington Ingalls HII, Curtiss-Wright Corporation CW and Northrop Grumman Corporation NOC. While Huntington Ingalls and Curtiss-Wright sport a Zacks Rank #1 (Strong Buy), Northrop Grumman carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls recorded an average positive earnings surprise of 3.85% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by $4.94 to $17.38 in the last 90 days.

Curtiss-Wright recorded an average positive earnings surprise of 15.06% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 60 cents to $5.79 in the last 90 days.

Northrop Grumman recorded an average positive earnings surprise of 16.17% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by $1.43 to $15.52 in the last 90 days.

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