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Boeing (BA) Wins $2.3B Contract to Build KC-46A Tanker Jet

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The Boeing Company’s (BA - Free Report) Defense, Space & Security business segment recently secured a modification contract involving the KC-46A Tanker aircraft. The award has been offered by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH.

Details of the Deal

Valued at $2.33 billion, the contract is expected to be completed by Jul 31, 2027. Per the terms of the deal, Boeing will manufacture 15 KC-46A aircraft from the 10th lot.

Work related to this deal will be carried out in Seattle, WA.

Significance of KC-46

The KC-46 Pegasus is a wide-body, multirole tanker that can refuel all U.S. allied and coalition military aircraft compatible with international aerial refueling procedures. The aircraft is also equipped to detect, avoid, defeat and survive threats using multiple layers of protection, which will enable it to operate safely in medium-threat environments.

What’s Favoring Boeing?

With growing security threats across the globe, emerging economies like the Asia Pacific, the Middle East and South America are spending a lot on enhancing their defense arsenals. Meanwhile, developed nations like the United States and Europe have already been leading the defense market for some time now.

It is imperative to mention in this context that military aircraft, both manned and unmanned, form an integral constituent of a country’s defense products. Notably, emerging trends in the combat aircraft space like the fifth-generation technology aircraft, advanced composite materials, stealth technology and refueling jets like KC-46 have been driving demand substantially. Impressively, KC-46A is the only multi-mission tanker that’s produced in America for the U.S. Air Force and its allies.

To date, Boeing has delivered 70 KC-46A tankers to the U.S. Air Force, while it is currently on contract to deliver four of these aircraft to Japan’s government. Such statistics surely reflect the solid demand that this jet enjoys in the combat aviation space, which, in turn, ushers in contract flows for Boeing. The latest contract win is an example of the same.

Growth Prospects

Per a report from the Mordor Intelligence firm, the global military aviation aircraft market is expected to witness a CAGR of 7.4% during 2023-2028, with North America constituting the largest share of this market.

Such developments can be attributed to a rise in global threats and geopolitical instabilities as well as increased defense spending. These projections are expected to benefit Boeing, along with other U.S.-based combat jet manufacturers like Lockheed Martin (LMT - Free Report) , Northrop Grumman (NOC - Free Report) and Textron (TXT - Free Report) .

Lockheed’s Aeronautics business segment is engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies. Its major programs include F-35, C-130 Hercules, F-16 Fighting Falcon and F-22 Raptor jets.

Lockheed boasts a long-term earnings growth rate of 8.6%. The stock has a four-quarter average earnings surprise of 4.35%.

Since its inception, Northrop Grumman has been a pioneer in the development of manned aircraft for combat. Its product portfolio ranges from fighter jets to stealth bombers, like B-2 Spirit Stealth bomber, E-2D Hawkeye jets, F-20 Tigershark and a few more.  

Northrop Grumman boasts a long-term earnings growth rate of 2.4%. The Zacks Consensus Estimate for NOC’s 2023 sales implies an improvement of 6.6% from the 2022 reported figure.

Textron’s business unit, namely Textron Aviation Defense, designs, builds and supports versatile and globally known military aircraft preferred for training and attack missions. Some of Textron’s renowned products include Beechcraft T-6C trainer and AT-6 Wolverine.

Textron boasts a long-term earnings growth rate of 11.7%. The Zacks Consensus Estimate for TXT’s 2023 sales implies an improvement of 6.4% from the 2022 reported figure.

Price Performance

Shares of Boeing have rallied 26.8% in the past year against the industry’s decline of 12.2%.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank

BA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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