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Boeing Secures $35M Deal to Support F/A-18, EA-18G Aircraft


The Boeing Company BA recently secured a $34.8-million contract for the delivery of hardware and retrofit kits for the F/A-18 A-F and EA-18G aircraft. Per the deal, Boeing will upgrade and replace obsolete components and software in the existing Servo-cylinder Test Stations and Electro-Hydraulic Valve Test Stations. The contract was awarded by the Naval Air Systems Command, Lakehurst, New Jersey.

Work related to the deal will be majorly carried out in St. Louis, MI and Chatsworth, California. The rest will be executed at the Naval Air Station North Island, California. Tasks related to the contract are expected to be completed in May 2022.

What Favor’s Boeing?

Boeing offers a wide range of software updates and hardware upgrades that increase the fidelity and flexibility of training devices. Some of these include implementation of new aerodynamics, engine and flight controls model upgrades, hardware kits, visual system and configuration changes, which are of great importance when it comes to meeting the training needs various aircraft. Inevitably, the strong presence that Boeing enjoys in the global software and hardware market, due to its vast technical expertise will surely enable the company in acquiring pivotal contracts related to hardware components.

In recent times, Boeing’s major aerospace programs along with its vast portfolio of associated services are witnessing a rapid rising demand, primarily due to the geopolitical uncertainties looming worldwide. Notably, the company's F/A-18 A-F and EA-18 Growler aircraft witnessed similar rise in demand in the last six months. Such rising demand, subsequently leading to frequent contract wins, will help Boeing expand its services market significantly.

Toward the end of June 2018, President Trump approved the fiscal 2019 defense budget that provisioned major war fighting investments of $21.7 billion for aircraft. It also included an investment plan of $2 billion for procuring 24 F/A-18 jets. This, in turn, will also increase demand for Boeing's hardware, software and technical services, and various other components, which would be pivotal in upgrading military aircraft. Additionally, such proposed inclusions also reflect solid growth prospects for Boeing's Defense, Space & Security Segment (BDS), which, in turn, are likely to boost the company’s profit margin.

Recent Buyout of KLX to Favor Boeing

Boeing recently completed the acquisition of KLX Inc. KLXI, a major independent provider of aviation parts and services in the aerospace industry. Going forward, the acquisition will certainly help Boeing enhance its global parts distribution and supply-chain services, and accelerate its Global Service’s growth strategies. The deal will also position the company in effectively serving customers in a $2.6-trillion global aerospace services market, for the next 10 years.

Price Movement

Boeing’s stock has gained 37.7% in the past 12 months compared with the industry’s growth of 13.4%. The outperformance was primarily led by the 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 sector are Heico Corp. HEI and Raytheon Co. RTN, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Heico came up with an average positive earnings surprise of 2.15% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen 2.73% to $1.88 in the last 90 days

Raytheon delivered an average positive earnings surprise of 3.64% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 0.6% to $9.93 cents in the last 90 days.

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