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Boeing Secures $168M Deal to Deliver F/A-18 Jets' Reparables

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The Boeing CompanyBA recently clinched a contract for delivering depot-level reparable pertaining to F/A-18 aircraft. The deal includes one five-year option period.

Valued at $167.8 million, the deal was awarded by the Defense Logistics Agency Aviation, Philadelphia, PA. Work related to it is scheduled to be over by Jul 1, 2027 and will be carried out in St. Louis, MI.

The company will utilize fiscal 2018 Navy working capital funds to finance the task.

Growing Demand of F/A-18

Boeing's Super Hornet aircraft is consistently advancing to outpace future threats. Its radar, mission computers and sensors continue to evolve in order to meet extensive mission profiles. Boeing has also developed the Advanced Block III Super Hornet to complement existing and future air-wing capabilities owing to the ever-rising worldwide demand of military aircraft. These capabilities include battle-space situational awareness, counter stealth targeting, increased acceleration and improved survivability.

Such major developments have enabled Boeing in witnessing strong demand for its fighter aircraft and major aerospace programs, including the F-18 aircraft. This is evident from the contract that it secured from Kuwait in the first quarter of 2018 for delivering 28 F-18 Super Hornets. We believe that this latest contract will also help in substantiating Boeing jet fighters' strong position in the global market.

What's Favoring Boeing?

As Boeing's key forte lies in manufacturing combat-proven aircraft, it has inevitably secured large number of contracts from the Pentagon for long courtesy of its proven expertise in aerospace programs. Subsequently, revenues from its Defense, Space & Security (BDS) segment witnessed a 9% rise year over year to $5.59 billion in second-quarter 2018.

Furthermore, in May 2018 Boeing entered into an agreement to acquire KLX Inc. - a major independent provider of aviation parts and services in the aerospace industry. On completion, this buyout will certainly help Boeing to enhance its global parts distribution and supply chain services as well as accelerate Global Service's growth strategies. The deal will also position the company in effectively serving customers in a $2.6-trillion, 10-year services market.

Meanwhile, President Trump proposed fiscal 2019 defense budget in February that provisioned major war fighting investments of $21.7 billion for aircraft. It also included an investment plan of $2 billion for procuring 24 F/A-18Jets. Such proposed inclusions reflect solid growth prospects for the BDS segment, which in turn are likely to boost the company's profit margin.

Price Movement

Boeing's stock has rallied about 42.2% in a year compared with the industry 's 22.2% upside. The outperformance was primarily led by robust worldwide demand for its commercial aircraft and military jets.

Zacks Rank & Key Picks

Boeing currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are Aerojet Rocketdyne Holdings AJRD , Engility Holdings EGL and Huntington Ingalls Industries HII .

While Aerojet Rocketdyne Holdings sports a Zacks Rank #1 (Strong Buy), Engility Holdings and Huntington Ingalls carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Aerojet Rocketdyne came up with an average positive earnings surprise of 9.27% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings moved north 30.9% to $1.27 over the past 90 days.

Engility Holdings delivered an average positive earnings surprise of 19% in the preceeding four quarters. The Zacks Consensus Estimate for 2018 earnings climbed 16.8% to $2.02 over the past 90 days.

Huntington Ingalls Industries pulled off an average positive earnings surprise of 9.48% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings moved up 3.7% to $17.24 over the past 90 days.

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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.


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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