Aerospace giant The Boeing Co. (BA - Free Report) has clinched a modification contract for eight CH-47F new build helicopters. The deal aims to support the Royal Saudi Land Forces Aviation Command (RSLFAC).
Details of the Deal
Valued at $222.5 million, the contract has been awarded by the U.S. Army Contracting Command Redstone Arsenal, Redstone Arsenal, AL.
Work related to this deal is scheduled to be over by Jul 30, 2021 and will be carried out in Ridley Township, PA. The contract will use fiscal 2017 foreign military sales funds.
A Brief Note on CH-47 Chinook
Boeing’s CH-47 Chinook is an American twin-engine, tandem rotor, heavy-lift helicopter. Its speed of 170 knots is faster than other existing utility and attack helicopters. Its main functions include troop movement, artillery emplacement and battlefield resupply. The U.S. Army has been using Boeing’s Chinook since 1962.
Currently, the CH-47F/MH-47G modernization program is in full-rate production. This, in turn, will ensure that the American twin-engine remains in the U.S. Army at least through the 2030s. Particularly, Boeing is trying to keep pace with a slew of helicopter demand in domestic and international markets.
Meanwhile, the demand for this helicopter is on the rise, internationally as well as domestically. Last month, Boeing received a Foreign Military Sales (FMS) contract worth nearly $14.3 million to supply new parts of CH-47F Chinook helicopters to the Netherlands and Turkey.
Earlier in May 2017, Boeing had won another FMS contract valued at $541.1 million from the Netherlands to build 15 CH-47F cargo helicopters. Notably, Chinook helicopters are utilized by the Netherlands government for both defense and humanitarian purposes.
Boeing is one of the major players in the defense business. In fact, the company stands out among its peers by virtue of its broadly diversified programs, strong order bookings and solid backlog.
In particular, among other defense equipments, Boeing’s key forte has been combat-proven aircraft. Also, it has started developing military aerial refueling and strategic transport aircraft, of late. Additionally, with its proven expertise in aerospace programs, the company has been clinching a huge number of contracts from the Pentagon for long.
Markedly, the FMS contracts supported the large US-based defense companies when there was a marginal drop in domestic orders. Evidently, in November 2016, the Defense Security Cooperation Agency announced FMS of $33.6 billion for the fiscal year.
Again, in May 2017, President Trump signed a $110 billion defense package with Saudi Arabia, which will span over seven decades. This deal surpassed the $38 billion US-Israel defense pact that was inked in September 2016 for 10 years. We believe the recently signed contract forms a part of this arms deal worth $110 billion.
Thanks to the nation’s wide range of product offerings, because of which Boeing and other U.S. defense operators continue to receive defense contracts from the allied countries.
To this end, in a recent development, the United States has agreed to sell its Patriot missile defense system to Poland, which will benefit manufacturer Raytheon Company (RTN - Free Report) . The potential value of the deal could reach around $8 billion.
Shares of Boeing have surged 78.6% in the last 12 months, outperforming the industry’s gain of 37.1%. This might have been driven by the company’s strong balance sheet and cash flows that provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions. In addition, the company poses strong competition to its peers like Lockheed Martin Corp. (LMT - Free Report) and Huntington Ingalls Industries, Inc. (HII - Free Report) .
Boeing currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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