The Boeing Company
) has won a five-year contract from the U.S. Army for 177 CH-47
Chinook helicopters. The contract is potentially valued at $4
billion with an option for an additional 38 helicopters boosting
the total order to 215 aircrafts.
This twin-engine, heavy-lift Chinooks helicopter is considered as
the key component for combat, logistics and humanitarian
operations not only for the U.S. Army but also for 18 other
militaries around the globe. This multi-year deal is expected to
save the government more than $810 million as against a
year-to-year contract. Deliveries are slated to begin in 2015.
The U.S. Army currently has 241 F-model aircraft in its fleet and
the new deal will eventually bring the CH-47F fleet total close
to its goal of a solid 464 inventory. This figure also comprises
an additional 24 Chinooks to replace "peacetime attrition"
aircraft. Approximately 16 active-duty and National Guard units
fly the chopper.
Besides the cost saves from the multi-year contract, the U.S.
Army will reap the benefits of the production efficiency programs
implemented at Boeing. The company has already spent $130 million
to upgrade the Chinook manufacturing plant near Philadelphia in
Ridley Park, Pa.
For fiscal year 2014, beginning Oct 1, the Army intends to spend
over $5 billion on new aircraft. This budget includes Boeing's 38
CH-47F Chinook and 65 UH-60M Black Hawk helicopters made by
United Technologies Corp.
) affiliate Sikorsky Aircraft Corp. It also includes 19 MQ-1 Gray
Eagle drones manufactured by General Atomics Aeronautical Systems
Meanwhile, Boeing sees worldwide demand over the next 20 years to
touch more than 35,000 new airplanes, valued at $4.8 trillion.
This figure is higher than its earlier forecast of 34,000 new
planes with a value of $4.5 trillion. The outlook mainly reflects
rising demand from fast-growing emerging areas of the
Asia-Pacific, mainly for single-aisle jets like its new 737 MAX.
However, the company still remains uncertain about recovery in
Europe and North America and does not rule out a downward
The company expects passenger as well as cargo traffic to witness
5% growth annually. However, it foresees just 850 deliveries of
cargo freighters, down from the previous assumption of 940 given
a weak economy that has weighed on industrial shipments.
Boeing is one of the major players in the defense business and is
among the best-positioned in its sector due to its balanced
exposure to commercial aircraft and defense equipment. With the
gradual recovery of the global economy, we believe freight and
passenger traffic will improve going forward. Also, the U.S.
defense budget is skewed towards a number of prominent Boeing
Also, the U.S. DoD has a focus on Boeing's programs like the
F/A-18 fighter jet and its carrier based version EA-18G Growler,
P-8A Chinook helicopter, Apache and Osprey rotorcraft, and the
brigade combat team modernization program.
Boeing currently retains a Zacks Rank #3 (Hold). Other companies
in the industry which are worth considering are
Northrop Grumman Corp.
Erickson Air-Crane Inc.
). Northrop Grumman presently carries a Zacks Rank #2 (Buy) while
Erickson Air-Crane has a Zacks Rank #1 (Strong Buy).
BOEING CO (BA): Free Stock Analysis Report
ERICKSON AIR-CR (EAC): Free Stock Analysis
NORTHROP GRUMMN (NOC): Free Stock Analysis
UTD TECHS CORP (UTX): Free Stock Analysis
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