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Boeing (BA) Wins $1.6B Deal for Delivery of 11 P-8A Aircraft

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The Boeing Company (BA - Free Report) recently clinched a modification contract for manufacturing and delivering 11 P-8A Poseidon aircraft from the 12th Lot. The deal has been awarded by the Naval Air Systems Command, Patuxent River, MD.

Valued at $1.62 billion, the contract is projected to be completed in September 2024. Of the 11 jets, the U.S Navy will receive nine, while the other two will be supplied to Australia. Majority of the work related to the deal will be executed in Seattle, WA.

Importance of P-8A Poseidon

The P-8A Poseidon is militarized with maritime weapons, which patrol the globe, performing anti-submarine and anti-surface warfare, intelligence, surveillance and reconnaissance, and search and rescue missions. Seven nations across the globe have selected the P-8A as their future maritime patrol aircraft including South Korea and New Zealand. In February 2020, Britain’s Royal Air Force (RAF) received its first P-8A aircraft, which will be instrumental in monitoring Russian submarine activities.

This indicates the global demand that this jet model enjoys, which is further evident from the latest contract win. In March 2020, Boeing won a $1.5 billion worth contract for manufacturing 18 aircraft for the U.S. Navy, Republic of Korea Navy and the Royal New Zealand Air Force.

What’s Favoring Boeing?

Of the varied defense equipment that Boeing manufactures, the company’s strength lies in the development of combat-proven aircraft, such as the P-8A Poseidon. Additionally, Boeing started developing military aerial refueling and strategic transport aircraft for its fixed-wing military aircraft programs. Such notable developments are anticipated to fuel this aerospace giant’s growth, considering the increasing defense spending provisions made by the current U.S. administration.

Being the United States’ largest jet maker, Boeing enjoys a smooth flow of contracts for military jets and its associated upgrades. The latest contract win is an example of the same.  

Growth Prospects

Per a Mordor Intelligence report, the global maritime patrol aircraft market is anticipated to witness a CAGR of more than 3% during the 2020-2025 period. The heightening threat of global terrorism and geo-political issues alongside the need for replacing ageing maritime patrol aircraft with a new and advanced fleet will likely spur demand for maritime patrol aircraft during the forecast period, thereby boosting growth in the market.

Notably, major industry players poised to gain from surging maritime aircraft demand include Boeing, Lockheed Martin (LMT - Free Report) , Textron (TXT - Free Report) and Northrop Grumman (NOC - Free Report) .

Zacks Rank and Price Movement

In a year’s time, shares of Boeing, a Zacks Rank #3 (Hold) company, have surged 106.6% compared with the industry’s 32.4% rise.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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