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Boeing (BA) Secures Air Force Deal to Modify F-15 Program

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The Boeing Company (BA - Free Report) recently clinched a modification contract in relation to F-15C and F-15E Mission Training Centers (MTC). Work related to the deal is scheduled to be over by Sep 30, 2020.

Details of the Deal

Valued at $11.5 million, the contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson AFB, Ohio. Per the terms of the deal, the company will implement Mission Planning-18 (MP-18) into F-15C and F-15E MTCs to be compliant with Combat Air Force Distributed Mission Operations standards updates. The MP-18 updated changes will be installed in to the F-15C and F-15E trainers.

Work will be executed at Seymour Johnson Air Force Base, NC; Mountain Home AFB, ID; Langley AFB, VA; Kadena AB, Japan; and RAF Lakenheath, England. The company will utilize fiscal 2018 operations and maintenance funds to complete the task.

A Brief Note on F-15

Boeing’s F-15 Strike Eagle is a twin-engine, all-weather tactical fighter aircraft. Its proven design is unbeatable in air-to-air combat, with more than 100 aerial combat victories.

What’s Favoring Boeing?

Boeing is one of the major players in the defense business and stands out among its peers by virtue of its broadly diversified programs, strong order bookings and solid backlog. In second-quarter 2018, revenues at its defense segment — Boeing Defense, Space & Security (BDS) — increased 9% year over year to $5.59 billion.

Among other defense equipment, the company’s key forte has been combat-proven aircraft. Therefore, Boeing has been winning a large number of contracts from the Pentagon for a while, courtesy of its proven expertise in aerospace programs including F-15s.

In 2017, the company’s backlog increased 11% from the prior-year number, primarily driven by contract wins for the F-15 program. Needless to say, this reflects the popularity that the F-15 jet enjoys in the United States.

Additionally, with rising security threats across the globe, the developing economies like India, Qatar and a few more along with the developed nations like the United States and Europe are ramping up their arsenal. As a result, Boeing is expected to witness further inflow of contracts for the modernization of its combat-proven jets, similar to the latest one. This, in turn, should enable the company to generate solid backlogs in 2018 as well.

Meanwhile, in July 2018, the U.S. Senate approved the fiscal 2019 defense budget that provisions for major war fighting investments worth $21.7 billion for aircraft. Boeing, being the largest aircraft manufacturer in the United States, should be a significant beneficiary from this budgetary expansion.

Price Movement

In a year’s time, shares of Boeing have soared about 47.6% compared with the industry’s 23% rally. This outperformance can be primarily attributed to significant demand for its military jets along with robust worldwide demand for its commercial aircraft.

Zacks Rank & Key Picks                                   

Boeing currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector include Aerojet Rocketdyne , Engility Holdings and Huntington Ingalls (HII - Free Report) . While Aerojet sports a Zacks Rank #1 (Strong Buy), Engility and Huntington Ingalls carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aerojet Rocketdyne surpassed the Zacks Consensus Estimate in the trailing four quarter, with an average beat of 9.27%. It has a long-term earnings growth rate of 5.5%.

Engility exceeded the Zacks Consensus Estimate in the trailing four quarter, with an average beat of 19%. It has a long-term earnings growth rate of 5%.

Huntington Ingalls outpaced the Zacks Consensus Estimate in the trailing four quarter, with an average beat of 9.48%. It has a long-term earnings growth rate of 15%.

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