Boeing Gets Navy Contract

The Boeing Company ( BA - Analyst Report ) was awarded a $40 million cost-plus-incentive-fee delivery order for supplies and services in support of the F/A-18E/F Structures Service Life Assessment Program (Phase B3). The Naval Air Systems Command, Patuxent River, Maryland, is the contracting activity.

Work on the contract will be performed in St. Louis, Missouri, and El Segundo, California. The company expects to finish work on the contract in August 2015.

Boeing enjoys a unique position as the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries, and is also one of the largest aerospace and defense contractors. Besides, its revenues are spread across more than 90 countries around the globe.

Looking forward, Boeing in its 2012 Current Market Outlook estimates a $4.5 trillion market for 34,000 new commercial airplanes over the next 20 years. Boeing’s projection of growth is based on the strength of the commercial aviation market, recovery witnessed in world economies and strong demand for fleet addition and replacement. Airline traffic is forecast to grow at a 5% annual rate over the next two decades, with cargo traffic projected to grow at an annual rate of 5.2%.

Boosted by such strong projections, Boeing recently raised its full-year 2012 earnings per share guidance to a range of $4.40–$4.60 versus its earlier guidance range of $4.15–$4.35. The company’s revenue guidance for 2012 is in the range of $79.5–$81.5 billion versus the earlier range of $78.0–$80.0 billion. Commercial Airplanes' 2012 deliveries are expected to be between 585 and 600 airplanes, which are already sold out. This includes an expected 70 to 85 787 and 747-8 deliveries. Commercial Airplanes' 2012 revenue is expected to be between $47.5 billion and $49.5 billion with operating margin hovering around 9.0%.

In the defense space, however, the threat of cutbacks will loom over the company going forward. Overall, Boeing expects defense revenue for 2012 to be between $31.5 billion and $32.0 billion with operating margin greater than 9%.

Boeing currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock. This is in sync with other aerospace and defense behemoths, General Dynamics Corporation ( GD - Analyst Report ) and L-3 Communications Holdings Inc. ( LLL - Analyst Report ) .