The Boeing Co.
) was the biggest winner from Pentagon's funding list of Mar 4,
2014. The company won a sizeable $1.16 billion contract
modification to supply the U.S. Army with AH-64E Apache
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Per this contract, Boeing will remanufacture 72 Apaches as well
as build and deliver 10 wholly new Apaches for the Army. The
company will also refresh five crew trainers, refurbish one crew
trainer and provide integrated logistics support, ground support
equipment, spare parts, and perform engineering work on the
helicopters. The work on this contract is to be completed by Jun
30, 2016, and will be performed in Mesa, Ariz. Army Contracting
In the fourth quarter 2013, Boeing Defense, Space & Security
segment revenues increased approximately 6% year over year to
$8,855 million. Quarterly operating margin also expanded 180
basis points year over year to 10.8%.
Although the threat of defense cutbacks will loom over the
company going forward, Boeing still remains optimistic with a
2014 defense revenue target of $30.0 billion to $31.0 billion and
an operating margin of approximately 9.5%.
With the gradual strengthening of the global economy and the
budget issues drawing to an end, the defense majors are expected
to see stability in 2014. These companies are also on the lookout
for more international contracts, commonly referred to as foreign
military sales, to keep their top lines rolling.
The $1.1 trillion Omnibus spending measure that President Obama
signed into law recently was a big relief for the Pentagon. The
bill provides Pentagon with nearly $93 billion to buy weapons and
another $63 billion for research and development. Add to this the
growing commercial opportunities, thanks to an improving global
economy, aging commercial aircraft at most airlines and an
inevitable rise in commercial aircraft orders.
Boeing currently has a Zacks Rank #3 (Hold). Some better-ranked
stocks in the aerospace and defense industry include
Huntington Ingalls Industries, Inc.
Lockheed Martin Corporation
). While Huntington Ingalls carries a Zacks Rank #1 (Strong Buy),
Embraer and Lockheed hold a Zacks Rank #2 (Buy).