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Boeing (BA) Secures Navy Deal to Modify P-8A Jet Program

Zacks Equity Research

The Boeing Company BA recently won a $22.8-million modification contract to offer additional acoustics software support activity and engineering support for the P-8A Poseidon aircraft. The contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland.

Work related to the deal will be performed in Huntington Beach, CA, and is expected to be completed by January 2022. Per the terms of the agreement, the aerospace giant will also offer virtual machine efforts along with developing and integrating software for Multi-static Active Coherent Enhancements.

About P-8A

Boeing's P-8A is an aircraft designed for long-range anti-submarine warfare, anti-surface warfare, maritime surveillance and reconnaissance missions, capable of broad-area maritime and littoral operations. It is also effective at search and rescue missions.

What’s Favoring Boeing?

Being one of the major players in the defense business, Boeing stands out among its peers by virtue of its broadly diversified programs, strong order bookings and solid backlog. During first-quarter 2019, its defense segment — Boeing Defense, Space & Security (BDS) — witnessed a robust top-line growth, courtesy of increased weapons deliveries. We believe that the latest contract win along with the other notable ones in recent times will help the BDS segment to consistently deliver solid performances in the upcoming quarters.

In particular, among other defense equipment, Boeing’s key forte lies in the development of combat-proven aircraft such as the P-8A Poseidon. Additionally, the company has started developing military aerial refueling and strategic transport aircraft for its fixed-wing military aircraft programs. These developments should support this aerospace giant’s growth, considering the increasing defense spending provisions made by the current U.S. administration.

Notably, the latest fiscal 2020 defense budget has allocated major war-fighting investments worth $57.7 billion for aircraft. The financial plan also included an investment plan of $1.5 billion for 6 P-8A Poseidon jets. Such proposed inclusions highlight the BDS segment’s solid prospects, which in turn, are likely to boost the company’s profit margin.

Price Movement

In a year’s time, shares of Boeing have lost 4% compared with the industry’s 1.8% decline.

Zacks Rank & Key Picks

Boeing has a Zacks Rank #3 (Hold). A few better-ranked companies in the same industry are Leidos Holdings LDOS, Lockheed Martin LMT and Northrop Grumman NOC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Leidos Holdings delivered average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 1.1% up to $4.58 over the past 60 days.

Lockheed Martin delivered average positive earnings surprise of 17.35% in the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 4.7% to $20.41 over the past 90 days.

Northrop delivered average positive earnings surprise of 18.50% in the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 1.8% to $19.29 over the past 90 days.

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