Boeing Begins MYP III Delivery - Analyst Blog


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The Boeing Company ( BA ) has delivered the first G-57, an EA-18G Growler aircraft, to the US Navy. This delivery is part of a $5.3 billion F/A-18E/F and EA-18G Multi-Year Procurement ( MYP ) III contract.

The EA-18G Growler is an air combat platform that offers self-defense capabilities, accurate targeting along with a full spectrum of airborne electronic attack capability. The EA-18G Growler can be operated from an aircraft carrier deck or from land-based airfields. This warfighter was used during NATO operations in Libya in 2011.  

Boeing and the US Navy had entered into the MYP III contract in September, 2010. As per the agreement, Boeing will supply 124 units of F/A-18E/Fs and EA-18Gs by 2015, with an additional 24 units of F/A-18E/Fs. The US Navy might exercise an option to raise the agreed quantity up to 194 units of F/A-18E/Fs and EA-18Gs as per contract terms.

Prior to that, Boeing and the US Navy had already inked two more MYP contracts. Under MYP I, Boeing delivered 210 Super Hornets to the Navy from 2000 to 2004. As per MYP II, the company provided 257 units of F/A-18E/F and EA-18G aircrafts to the Navy from 2005 through 2009.

The US Navy is well poised to generate total savings of more than $2.3 billion on the back of the MYP contracts, including $605 million from the MYP III agreement.

We believe that Boeing is well positioned with multi-sector exposure, driven by its plans to build a solid position in the defense equipments, and space and security services market. The company is focused on achieving strong growth and profitability in its core operations in both the domestic and international markets.

At the same time, the company also concentrates on disciplined increase in production rates to cope up with the high demand from commercial airplane customers. The demand for the company's other products and services remains impressive, particularly in international markets like Africa, Middle East and South East Asia.

But, at the same time, we are skeptical about the US defense budget cutbacks over the next decade, which might impact several Boeing programs. If this trend continues, then most of the countries will also trim down their defense budget. Boeing is also facing stiff competition from its peers. At the same time, delay in development and delivery of commercial airplanes might also impact future growth.

The company currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Headquartered in Chicago, The Boeing Company is a premier jet aircraft manufacturer and one of the largest defense contractors in the US. The company mainly competes with Lockheed Martin Corporation ( LMT ) and Northrop Grumman Corporation ( NOC ).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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