Back to top

Image: Bigstock

Boeing Defense Unit Wins $80M Deal to Support E-4B Aircraft

Read MoreHide Full Article

The Boeing Company’s (BA - Free Report) Defense, Space & Security business segment recently secured a modification contract for providing sustainment support to its E-4B military aircraft. Work related to this deal is expected to be over by Nov 30, 2018.

Details of the Deal

The contract, with a ceiling value of $80 million, was awarded by the Force Life Cycle Management Center, Tinker Air Force Base, OK. Per the terms of the deal, Boeing will offer program management, field service representative, system integration laboratory, spare procurement, repair/overhaul, emergency support and engine overhaul. 

The related work will be carried out in Oklahoma City, OK and Offutt Air Force Base, NE. Fiscal 2018 operations and maintenance funds will be utilized to partially finance the deal.

A Brief Note on E-4B

The E-4B, a militarized version of the Boeing 747-200, is a four-engine, swept-wing, long-range high-altitude airplane capable of refueling in flight. An E-4B can provide seating for up to 112 people, including a joint-service operations team, Air Force flight crew, maintenance and security component, communications team and selected augmentees.

These aircraft are equipped with 13 external communications systems and are designed for 72 hours long missions. Their aircraft provide protection against electromagnetic radiation and nuclear blast.

Secondary missions assigned to the E-4B include VIP travel along with Federal Emergency Management Agency support, which facilitates communications in relief works following natural disasters such as hurricanes and earthquakes.

What’s Favoring Boeing?

Boeing is one of the major players in the defense business. The company's defense segment stands out among its peers by virtue of its broadly diversified programs, strong order bookings and order backlog. The company has also reshaped its defense portfolio from time to time. Effective July 2017, it created a new segment — Boeing Global Services (BGS) — to include its  Commercial Aviation Services businesses, and certain Boeing Defense, Security & Services (BDS) businesses (primarily those previously included in the Global Services & Support segment). The move is expected to enhance product efficiency and lower costs for Boeing's defense customers in addition to maintaining delivery schedules.

In particular, among other defense equipments, Boeing’s key forte has been combat-proven aircraft. Also, it started developing military aerial refueling and strategic transport aircraft, of late. In fact, with its proven expertise in aerospace programs, the company has been clinching a number of contracts from the Pentagon for long.

For example in October, the company won a contract worth $240 million for the Royal Saudi Air Force (RSAF) airborne warning and control system (AWACS) modernization program phase 1. In the month prior to that, Boeing secured a modification contract worth $600 million to provide new preliminary design activity requirements for the Presidential Aircraft Recapitalization program.

Additionally, recent Senate approval for the $700-billion National Defense Authorization Act indicates significant inflow of contracts for the front-row defense stocks in the United States. This, in turn, will most likely prove to be beneficial for defense majors like Boeing, Lockheed Martin Corp. (LMT - Free Report) , General Dynamics Corp. (GD - Free Report) and Huntington Ingalls Industries, Inc. (HII - Free Report) in the near term.

Although BDS segment’s performance was weak in the third quarter of 2017, management expects this business unit is poised to grow, going forward. Considering the current favorable budgetary scenario, we anticipate that such generous fund flows from Pentagon, in the form of contracts, like the latest one, will help Boeing to achieve its desired business expansion in the near term.

Price Movement

Shares of Boeing have rallied 81.5% in the last 12 months, outperforming the industry’s gain of 31.1%. This could be because of 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.

 

 

Zacks Rank

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

5 Medical Stocks to Buy Now

Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.

New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.

Click here to see the 5 stocks >>

Published in