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Boeing Secures $71M Deal to Support T/AV-8B Harrier Aircraft

Zacks Equity Research

The Boeing Company BA recently secured a $71.3-million contract for providing engineering and integrated logistics services to support the post-production phase of the T/AV-8B Harrier aircraft. The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.

Majority of the work related to this deal will be performed in St. Louis, MI. The entire task is expected to get completed by December 2023.

A Brief Note on T/AV-8B Harrier Aircraft

The AV-8B Harrier strike aircraft is used for carrying out special combats and expeditionary requirements for the Marine Corps. The AV-8B is equipped to carry and deliver an assortment of conventional stores such as the Mk 83 1,000-pound GP bomb, Cluster Bomb Units, and 2.75" and 5" rockets. The aircraft can also operate from carriers and other seagoing platforms, advanced bases, expeditionary airfields and remote tactical landing sites.

Significance of the Deal

Boeing, being one of the major players in the defense sector, stands out among its peers by virtue of its broadly diversified programs, strong order bookings and solid backlog. In fourth-quarter 2018, revenues at its Boeing Defense, Space & Security (BDS) segment, which manufactures the AV-8B Harrier Aircraft along with other military jets, increased 16% year over year to $6.11 billion.

The year-over-year increase in sales is predominant as the company has been winning a large number of contracts from the Pentagon for long, courtesy of its proven expertise in aerospace programs. As Boeing is the largest aircraft manufacturer in the world, we can expect more such contracts from Pentagon, thereby boosting its profit margin.

Looking Ahead

Per Mordor Intelligence, the global military aircraft market is expected to increase to $78.1 billion by 2023, where reconnaissance and surveillance aircraft and bombers are expected to account for 12.5% of the market. This, in turn, will increase the demand for various military aircraft along with the requirement for technical services and regular upgrades. Hence, Boeing is most likely to benefit from such favorable projections, going forward.

Price Performance

Shares of Boeing have rallied 20.6% in the past 12 months compared to the industry’s growth of 0.1%.

Zacks Rank & Key Picks    

Boeing currently carries Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are Spirit Aerosystems Holdings SPR, AeroVironment, Inc. AVAV and Heico Corporation HEI.

While Spirit Aerosystems sports a Zacks Rank #1 (Strong Buy), Heico and AeroVironment carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Spirit Aerosystems’ long-term growth estimates currently stand at 7.8%. The Zacks Consensus Estimate for 2019 earnings has risen 3.7% to $7.56 in the past 90 days.

Heico Corporation came up with average positive earnings surprise of 4.8% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 2.9% to $2.14 in the past 90 days.

AeroVironment’ long-term growth estimates currently stand at 25%. The Zacks Consensus Estimate for 2019 earnings has risen 16.67% to $1.75 in the past 90 days.

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The Boeing Company (BA) : Free Stock Analysis Report
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