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Boeing Wins $172M Navy Deal for F/A-18E/F Aircraft Support

Zacks Equity Research

The Boeing Company BA recently won a $172.2-million contract, which entails the jet-maker to bring in modifications to extend the operational service life from 6,000 flight hours to 10,000 flight hours of up to 23 F/A-18E/F aircraft.

Work related to the deal will be executed in San Antonio, TX; El Segundo, CA; and St. Louis, MI. It is scheduled to get completed in May 2022. The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.

Rising Importance of Boeing’s F/A-18E/F Super Hornet

Recently, Boeing’s F/A-18E/F Super Hornet combat aircraft has emerged to be a major choice of weapon for militaries across the world. In fact, the Royal Australian Air Force and the Kuwait Air Force, apart from the U.S. Navy, operate these fighter aircraft in large numbers.

Furthermore, nations like Canada, Finland, Switzerland and Spain currently have Boeing’s Super Hornet within their arsenal. Evidently, once the new modifications are implemented, the demand for the upgraded version of the same is expected to rise.

What Favors Boeing?

Boeing, being one of the major players in the defense business, stands out among peers owing to its broadly diversified programs, strong order bookings and solid backlog. This allows the company’s defense segment to generate a solid top-line performance. Evidently, Boeing Defense, Space & Security (BDS) segment witnessed a 2% year-over- year increase in third-quarter 2019 revenues to $7.04 billion.

Moreover, the U.S. government approved the fiscal 2020 defense budget earlier this year, under which the Department of Defense would receive $718 billion, reflecting a 4.9% increase from the prior-year budget. The budget includes a spending plan of $57.7 billion on aircraft, reflecting a massive surge of 166% from the approved fiscal 2019 defense spending on aircraft. This should usher in more contracts for Boeing’s BDS segment, going ahead.

Looking Ahead

Per a Frost and Sullivan, the global combat aircraft market is expected to see a CAGR of 0.3% to $47.2 billion by 2026 from 2017. Such growth can be attributed to the rise in global threats, geopolitical instabilities and increased spending on defense. These projections should continue to boost demand for Boeing’s fighter jets and other combat aircraft programs.

Price Performance

Shares of the company have gained 5.2% in the past three months compared with the industry’s growth of 2.2%.


Zacks Rank & Key Picks    

Boeing currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same space are Northrop Grumman NOC, L3Harris Technologies Inc LHX and Leidos Holdings LDOS, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Northrop Grumman delivered average positive earnings surprise of 11.48% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 3.8% to $20.38 in the past 90 days.

L3Harris Technologies came up with average positive earnings surprise of 5.02% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 7.5% to $9.99 in the past 90 days.

Leidos Holdings delivered average positive earnings surprise of 8.93% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved up 4.6% to $4.96 in the past 60 days.

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