Boeing (BA) Wins $6.5B Air Force Contract for JDAM Tail Kits

The Boeing Company’s BA Defense Space and Security segment recently won a modification contract for providing Joint Direct Attack Munition (JDAM) tail kits, spares, repairs and technical services. The deal has been awarded by the Air Force Life Cycle Management Center, Hill Air Force Base, UT.

Details of the Deal

The latest modification will extend the original contract for an additional five years. It also increased the contract ceiling by $6.5 billion to $10 billion.
The deal also involves foreign military sales.

Work related to the deal will be performed in St. Louis, MO, and is scheduled to be completed by Feb 28, 2025.

A Brief Note on JDAM

JDAM is a low-cost guidance tail kit that converts existing unguided free-fall bombs into guided weapons accurately. The JDAM kit consists of a new tail section that contains an inertial navigation system/global positioning system (INS/GPS) and body strakes for additional stability and lift. With the help of JDAM, bombs can be accurately delivered in any weather conditions and launched at a great distance from the target.

The U.S. Air Force, U.S. Navy and the militaries of more than 26 countries employ JDAM. Its latest version, JDAM Extended Range features a modular add-on wing kit that will unfold in flight. The kit can also be coupled with other modular enhancements such as laser sensors.

Our View

Rising geopolitical conflicts across the globe lead to frequent warfare and have prompted nations to effectively expand their defense arsenal. Lately, munitions have captured a significant position in a nation’s armory as these are more viable options to autonomously search and launch attacks on a particular target, without human intervention.

Although Boeing is known for its combat proven aircraft, the company has served the nation by producing, integrating and supporting precise, long-range and focused munitions capabilities. Impressively, to date, Boeing has built more than 260,000 JDAM tail kits, which reflects the solid demand for this munition system. The latest contract win is a further testament to that fact.

Meanwhile, the global precision guided munition market is projected to grow from $30 billion in 2019 to $47.5 billion by 2025, at a CAGR of 8% from 2019 to 2025 (per Markets and Markets firm). Such optimistic projections should boost Boeing’s top line, with the company being one of the major defense players across the world.

Price Movement

Boeing’s stock has gained 5.8% in past six months compared with its industry’s rally of 12.3%.

Zacks Rank & Key Picks    

Boeing currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same industry are Wesco Aircraft Holdings WAIR, Northrop Grumman Corp. NOC and Leidos Holdings LDOS. While Wesco Aircraft sports a Zacks Rank #1 (Strong Buy), Northrop and Leidos Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Wesco Aircraft’s long-term growth is estimated to be 12%. The Zacks Consensus Estimate for 2019 earnings has increased 3.7% to 84 cents in the past 60 days.

Northrop Grumman came up with average positive earnings surprise of 18.50% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 2.26% to $19.42 in the past 60 days.

Leidos Holdings came up with average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 1.54% to $4.60 in the past 60 days.

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