The largest U.S. defense contractor by market cap,
The Boeing Company
) has received a total of four contracts, worth $195 million,
from the U.S. Department of Defense (DoD) on Sep 27, 2013. The
DoD issued 113 contracts in total with a total value of $10.92
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First among the four contracts wins calls upon Boeing to supply
the U.S. Army with seven MH-47G Chinook helicopters modified for
special forces operations. This is a non-multi-year, no option,
firm-fixed-price contract in order to fix the price on a delivery
order with a total value of $78.2 million.
The second contract, worth $69.8 million, is a contract
modification to build and deliver one C-40A Clipper passenger
aircraft to the U.S. Navy by Nov 2016. The company has also won a
$24.0 million indefinite-delivery/indefinite-quantity contract to
provide the U.S. Navy with engineering and technical services
associated with the Reconfigurable Transportable Consolidated
Automated Support System, or RTCASS, stations. This contract runs
through Sep 2018.
Lastly, Boeing won an indefinite-delivery/indefinite-quantity,
cost-plus-fixed-fee contract worth up to $23 million, for work on
the Degraded Visual Environments ("DVE") system. This system
helps to boost situational awareness for MH-47 Chinook and MH-60
Seahawk special ops helicopter aircrew. This contract will not
exceed 60 months and is scheduled to finish by Aug 31, 2017.
The series of contract wins imply that the defense behemoths are
to some extent immune to the threat of sequestration. The steady
flow of contracts would help the company to overcome the
uncertain fate of high-cost programs, risks related to key
project executions and order cancellations.
Recently, the company faced one such cancellation of considerable
value. South Korea denied offering Boeing a $7.7 billion contract
for its F-15 Silent Eagle fighter jets. Boeing was rumored to
have almost clinched the order for the fighter jet ahead of
Lockheed Martin Corp.
) F-35 and Eurofighter's Typhoon on the basis of its lower cost.
However, pressure to invest in more advanced planes has compelled
the South Korean government to reconsider the case. Any such
future cancellations would pose a threat to the company's top
Boeing presently carries a short-term Zacks Rank #3 (Hold).
Stocks worth considering in the space are Lockheed Martin,
Northrop Grumman Corp.
), all with a Zacks Rank #2 (Buy).