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Boeing Wins $416M Navy Deal to Manufacture P-8A Aircraft

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The Boeing Company (BA - Free Report) recently secured a modification contract worth $416.4 million for the full-rate production of three P-8A multi-mission maritime aircraft of the 9th lot. Work related to this deal is scheduled to be completed by October 2020.

The contract was awarded by the Naval Air Systems Command, Patuxent River, MD. Per the terms of the deal, Boeing will manufacture and deliver the jets to U.S. Navy.

Majority of the work will be executed in Seattle, WA. Fiscal 2018 aircraft procurement (Navy) funds will be used to finance this task.

About P-8A Aircraft

Boeing’s P-8A Multi-mission Maritime aircraft, also known as Poseidon, is used for long-range anti-submarine warfare, anti-surface warfare and intelligence as well as surveillance and reconnaissance missions. It is also capable of broad-area littoral operations.

P-8A, a derivative of the Next-Generation 737-800 and its variant for India, the P-8I, deliver a superior performance and reliability with an advanced mission system that ensures maximum interoperability in the future battle space.

Our View

As a major player in the defense business, Boeing’s defense segment stands out among 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.

Particularly, among other defense equipment, Boeing’s forte has been its combat-proven aircraft. Of late, the company has also started developing military aerial refueling and strategic transport aircraft. In fact, with its proven expertise in aerospace programs, Boeing has been clinching a number of contracts from the Pentagon.

At the end of first-quarter 2018, the defense segment had a backlog worth $50 billion, further reflecting the slew of orders that Boeing enjoys for its varied weaponries. Going ahead, similar backlog figures can be expected at this segment, buoyed by contract wins like the latest one.

Notably, the fiscal 2019 defense budget worth $716 billion, proposed by President Donald Trump in February 2018, includes a $2.2-billion provision for procuring 10 P-8A jets. Considering this, we may expect Boeing to gain more contracts from the Pentagon on solid demand for its military aircraft.

Price Movement

In a year’s time, shares of Boeing have soared about 92.3% compared with the broader industry’s surge of 41.1%. The outperformance was primarily led by significant demand for its military jets along with long-term robust demand for its commercial aircraft.

 

Zacks Rank & Other Key Picks                        

Boeing currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the same sector are AeroVironment, Inc. (AVAV - Free Report) , Kratos Defense & Security Solutions (KTOS - Free Report) and Wesco Aircraft Holdings, Inc. (WAIR - Free Report) . While AeroVironment and Kratos Defense sport a Zacks Rank #1 (Strong Buy), Wesco Aircraft Holdings carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AeroVironment recorded an average beat of 147.43% in the last four quarters. The company’s long-term growth rate is pegged at 20%.

Kratos Defense pulled off an average positive earnings surprise of 9.52% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has been moved up by a penny to 19 cents in the past 60 days.

Wesco Aircraft Holdings’ long-term growth rate stands at 12%. The Zacks Consensus Estimate for fiscal 2018 earnings rose by 7 cents to 77 cents in the last 90 days.

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