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Boeing (BA) Wins $294M Order for Three Next-Gen 737-800 Jets

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Aircraft giant, The Boeing Company BA, has entered into a draft deal for delivering three Next-Generation 737-800 airplanes to Algeria-based Tassili Airlines, per Reuters. Although the details of the contract have been revealed recently, the order was announced during the Paris Air Show, last month.

However, at that time, Boeing's orders & deliveries website had attributed the order to an unidentified customer.

Coming back to the details, the contract is valued at $294 million at list prices. Per the terms, Boeing will deliver these airplanes during the second half of 2018.

A member of the Next-Generation 737 family, the 737-800, continues to be extremely popular as a single-aisle aircraft. This is because of its advanced technology, and low operation and maintenance costs.

The new 737s will feature the Boeing Sky Interior – the 787 Dreamliner inspired cabin – that provides passengers a sense of space with decorative sidewalls, larger windows, LED mood lighting and larger pivot overhead stowage bins.

Recent Deals Inked at the Paris Air Show

Demand for Boeing’s commercial airplanes has been rising, owing to a steady increase in passenger and freight traffic. This has been even more strongly reflected in recent times, when the aerospace behemoth successfully won the maximum number of contracts at the Paris Air Show. In addition to the aforementioned deal,  other notable contracts secured by Boeing at the Air Show, include a commitment from the Kuwait-based ALAFCO Aviation Lease and Finance Company for 20 737 MAX 8s, valued at $2.2 billion at current list prices. Moreover, Lion Group is committed to buy 50 737 Max 10 jets from the company for $6.24 billion.

Also, Boeing signed a memorandum of understanding (MOU) with SpiceJet for 40 737 MAX airplanes worth $4.7 billion. Another MOU worth $2.5 billion was signed with Tibet Financial Leasing for 20 737 MAX airplanes. Moreover, Boeing signed an MOU with BOC Aviation Limited for 10 737 MAX 10 airplanes, worth nearly $1.25 billion.

Apart from this, the company clinched an order from AerCap for 30 787-9 Dreamliners, worth $8.1 billion. Given the huge commercial demand, Boeing is expected to witness significant traction going ahead, especially in the single-aisle market.

Single-Aisle Aircraft in Demand

Boeing anticipates demand for 29,530 single-aisle jets, worth $3.2 trillion, in the next 20 years. This projected figure reflects a 5% increase over last year's projection.

Moreover, the company expects single-aisle jets to be the major driver of demand growth, comprising 72% of the total commercial jets’ demand projection. While the new 737 MAX and the 737-800 is likely to grab the lion’s share of the new orders, Boeing’s arch-rival Airbus Group SE’s EADSY A320neo is expected to pose significant challenges.

Nevertheless, Boeing’s 737 model remians one of the best-selling planes in the single-aisle market, thanks to its fuel efficiency and passenger comfort. Therefore, to maintain its dominance in the commercial aerospace market, this aerospace behemoth continues to invest in research and development for upgrading and churning out upgraded versions of its existing planes.

Q1 Order Details

Boeing’s second-quarter 2017 order details show that the company booked 183 net commercial orders (accounting for cancellations). In the first half of 2017, it booked 381 net commercial orders. On the contrary, Boeing’s rival, Airbus registered net bookings of just 203 aircraft in the same period, trailing far behind.

Since, Boeing and Airbus are the two largest players in the commercial aircraft space their direct rivalry is quite evident. This, in turn, leads to intensifying competition in the Aerospace–Defense industry. Nevertheless, the huge orders Boeing has won recently places it in a better position in the industry.

Price Movement

Share price of Boeing has increased 55.8% in the last 12 months, outperforming the Zacks categorized Aerospace–Defense industry’s gain of 26.7%. This could have been driven by the company’s strong balance sheet and cash flows that provide financial flexibility in matters of incremental dividend, ongoing share repurchases as well as earnings accretive acquisitions. Additionally, the stock’s performance is in line with that of General Dynamics Corp. GD and Textron Inc. TXT that also surpassed the industry mark.

Zacks Rank

Boeing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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