The Boeing Co. (BA) won an undefinitized contract, worth $234.7 million, associated with production and delivery of AH-6I aircraft for Saudi Arabia.
The contract basically entitled Boeing to secure long lead items necessary for the production as well as delivery of 24 AH-6I aircraft, along with initial spares package and ground support equipment. This contract involves foreign military sales (FMS) to Saudi Arabia while the Army Contracting Command of Redstone Arsenal, Alabama is the contracting activity. Work on this contract is slated for completion by Dec 31, 2016.
Though announced on Aug 29, 2014, we remind investors that the order was initially revealed by Boeing in 2013. The Saudi Arabia National Guard is acquiring 24 AH-6I helicopters as part of a wider build-up of its rotary-winged capabilities.
The AH-6I is a light attack/reconnaissance helicopter having a new range of strike capabilities. It is an improved variant of the AH-6M helicopter operated by the U.S. Army Special Operations Forces and is designed mainly for export markets. The helicopter is planned to provide close air support for land-based forces.
The AH-6I incorporates mission-equipment technologies from the Army’s AH-6E Apache combat helicopter and can also serve as an attack platform for destroying enemy tanks, armored vehicles, fortifications and provide an integrated precision night reconnaissance.
FMS are to some extent making up for U.S. defense budget cuts. Internationally, Boeing is witnessing strong demand for its defense products, such as fighter jets, the rotorcraft line-up and 737-based military derivatives.
Boeing is optimistic of achieving its 2014 defense revenue target of $30.0 billion to $31.0 billion and an operating margin of approximately 9.5% largely on the strength of FMS deals.
Boeing currently has a Zacks Rank #2 (Buy). Other companies in the defense space worth considering include Air Industries Group (AIRI), Lockheed Martin Corp. (LMT) and General Dynamics Corp. (GD). Air Industries carries a Zacks Rank #1 (Strong Buy), while Lockheed and General Dynamics hold the same rank as Boeing.