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Boeing (BA) Wins Navy Deal to Upgrade P-8A Aircraft Program


The Boeing Company BA recently won a modification contract for offering supplies and services to support its P-8A aircraft program. Work related to the deal is scheduled to be over by July 2019.

Details of the Deal

Valued at $17.8 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Per the agreement, Boeing will conduct aircraft test operations, maintenance and support operation of the Naval Air System Command’s System Integration Laboratory. It will also carry out maintenance and support operation of test equipment and test asset support equipment.

The majority of the task will be executed at the Naval Air Station, Patuxent River, MD. The company will utilize fiscal 2018 research, development, test and evaluation (Navy) funds to complete the modification.

P-8A Jet’s Specifications

Boeing's P-8A is an aircraft designed for long-range anti-submarine warfare, anti-surface warfare, and maritime surveillance and reconnaissance missions. The aircraft is capable of broad-area maritime and littoral operations as well.

It is also effective at search and rescue missions. P-8 is a derivative of the Next-Generation 737-800, which combines superior performance and reliability with an advanced mission system to ensure maximum interoperability in the future battle space.

Our View

Boeing, being one of the major players in the defense business, stands out among its peers by virtue of its broadly diversified programs, strong order bookings and solid backlog. This aids the company’s defense unit — Boeing Defense, Space & Security (BDS) segment — to exhibit a solid revenue generation history. Evidently, revenues at the BDS unit improved 13% year over year in first-quarter 2018.

Moreover, Boeing’s key forte lies in manufacturing combat-proven aircraft. In fact, it has been inevitably securing large number of contracts from the Pentagon for long, courtesy of its proven expertise in aerospace programs. For instance, the aircraft giant secured a $131 million deal for MH-47G Block II jet, $1.6 billion deal for delivering 4 P-8A jets to New Zealand Air Force and a $4.2 billion contract to build variants of V-22 jets in last few days. Considering these awards, we may expect the company’s impressive top line performance to continues in the coming days.

Meanwhile, fiscal 2019 U.S. defense budget, which was approved last month, provisioned major war fighting investments of $21.7 billion for aircrafts. It also included an investment plan of $2.2 billion for 10 P-8A Poseidon jets. Such proposed inclusions reflect solid growth prospects for the BDS segment, which in turn are likely to boost Boeing’s profit margin in the future.

Price Movement

In a year’s time, Boeing has surged about 67.8% compared with the industry’s 30.7% rally. The outperformance can be primarily attributed to robust worldwide demand for its commercial aircraft and military jets.

Zacks Rank & Key Picks

Boeing currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are Northrop Grumman NOC, Engility Holdings EGL and Wesco Aircraft Holdings WAIR. While Northrop Grumman sports a Zacks Rank #1 (Strong Buy), Engility Holdings and Wesco Aircraft Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman delivered an average positive earnings surprise of 13.87% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings moved up 6.9% to $16.62 in the last 90 days.

Engility Holdings came up with an average positive earnings surprise of 15.08% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings inched up 0.5% to $1.91 in the last 90 days.

Wesco Aircraft Holdings’ long-term growth rate is projected at 12%. The Zacks Consensus Estimate for 2018 earnings moved north 10% to 77 cents in the last 90 days.

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