The U.S. Department of Defense (DoD) dispersed 35 contracts worth $1.78 billion on Aug 30, 2013. Though not sizeable, The Boeing Company (BA) received two full contracts and a part of a third contract shared with Textron Inc. (TXT).
The first contract worth $24.1 million calls for the supply of rotary wing blades for U.S. Army helicopters. The contract is scheduled to be completed through Aug 31, 2015.
Per the second modification contract, worth $22.7 million, the company will develop and demonstrate a new version of the AH-64 Apache Block III attack helicopter. Post modernization, the helicopter will have in-flight control of unmanned aerial vehicles and a new split-torque face gear transmission that enhances the power by more than 20% compared to the previous versions of the Apache.
The third contract was for the Bell Boeing Joint Project Office, a joint venture of Boeing and Textron, for the production of V-22 Osprey tiltrotor aircraft. Per this contract, worth $8.9 million, the joint venture will supply 10 V-22 Block A to B 50-69 series upgrade kits and 10 V-22 Block A to B 50-69 series and install it for the U.S. Naval Air System Command.
Despite the threat of sequestration, we note that the DoD is continuing to award contracts to defense players – both big and small, publicly traded or private firms.
On Aug 20, 2013, the DoD offered a string of contracts to Lockheed Martin Corp. (LMT), Textron, Raytheon Company (RTN) and other privately held firms like BAE Systems, Odyssey International Inc. and Berger Cummins Joint Venture.
Boeing is also one of the major players in the defense business, which accounts for approximately half of its top line. Boeing’s defense business stands out among its peers by virtue of its broadly diversified programs, strong order bookings and order backlog. Also, the U.S. DoD has a focus on Boeing’s programs like the F/A-18 fighter jet and its carrier based version, EA-18G Growler, P-8A Chinook helicopter, Apache and Osprey rotorcraft, and the brigade combat team modernization program.
Internationally, the company is witnessing strong demand for its defense products, such as, fighter jets, the C-17 series transport aircraft, the rotorcraft line-up and 737-based military derivatives. Despite the threat of domestic defense budget cuts, the company will likely continue to boost profits from its more profitable programs (737, 777 and 787-10), going forward. The company presently retains a short-term Zacks Rank #3 (Hold).
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