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Boeing Wins $31M Navy Deal for Upgrading P-8A Repair Manual

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The Boeing Company (BA - Free Report) recently won a $30.8-million modification contract for upgrading the structural repair manual of the P-8A Multi-mission Maritime aircraft. The deal was awarded by the Air Naval Air Systems Command, Patuxent River, MD.

Work related to the agreement will be performed in Seattle, WA and is expected to be completed by August 2020. Boeing will utilize fiscal 2016 aircraft procurement (Navy) funds for completing the task.

Benefits of the P-8A Aircraft

Boeing's P-8A is an aircraft designed for long-range anti-submarine warfare, anti-surface warfare, and maritime surveillance and reconnaissance missions. The military aircraft is one of the world’s most advanced anti- submarine warfare aircraft and has massively benefited the U.S. Navy ever since it replaced the Navy’s fleet of obsolete P-3 Orion aircraft. The fighter jet is equipped with advanced sensors including an APY-10 radar system, and can also carry several types of bombs, Mark 54 lightweight torpedoes and mines.

Recent Upgrades in the P-8A Aircraft

During March 2018, the U.S. Navy (USN) rolled out a software upgrade program designed to improve mission system functionality as well as support and maintain the P-8A Poseidon maritime patrol aircraft (MPAs) Increment 1 and 2 variants. We believe that the recent contract, which emphasizes on upgrading the structural repair manual for the P-8A jets, will ultimately help in improving certain aspects of this maritime aircraft’s performance.

What’s Favoring Boeing?

Boeing’s key forte lies in manufacturing combat-proven aircraft. Courtesy of its proven expertise in aerospace programs, the company has been successful in frequently securing large number of contracts from the Pentagon. Evidently, the second quarter of 2018 was no different for Boeing, as it secured important contracts from the U.S. Navy and also a $1.6-billion deal for delivering 4 P-8A jets to the New Zealand Air Force.

Notably, during the second quarter, the company’s defense unit — Boeing Defense, Space & Security (BDS) — won key contract awards worth $7 billion along with a backlog standing firm at $52 billion. As a result, its BDS unit once again exhibited a solid year-over-year revenue growth of 9% in the quarter. We believe that the latest contract along with many more expected to follow should allow Boeing’s defense segment to exhibit similar solid performances in days ahead.

Meanwhile, toward the end of June 2018, the U.S. Senate approved the fiscal 2019 defense budget that provisions for major war fighting investments worth $21.7 billion for aircraft. Interestingly, the budget included an investment plan of $2.2 billion for 10 P-8A Poseidon jets. Boeing, being the largest aircraft manufacturer in the United States, should be a significant beneficiary from the approved budget, which, in turn, is likely to boost the company’s profit margin in the future.

Price Movement

Boeing’s stock has gained 49.1% in the last 12 months compared with the industry’s growth of 24.2%. The outperformance was primarily led by the robust worldwide demand for its commercial aircraft and military jets.



Zacks Rank & Stocks to Consider

Boeing currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same sector are Aerojet Rocketdyne Holdings , Engility Holdings and Huntington Ingalls Industries (HII - Free Report) .

While Aerojet Rocketdyne Holdings sports a Zacks Rank #1 (Strong Buy), Engility Holdings and Huntington Ingalls carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet Rocketdyne came up with an average positive earnings surprise of 9.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 30.9% to $1.27 in the last 90 days.

Engility Holdings delivered an average positive earnings surprise of 19% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 16.8% to $2.02 in the last 90 days.

Huntington Ingalls Industries came up with an average positive earnings surprise of 9.48% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 3.7% to $17.24 in the last 90 days.

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