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Boeing Wins $195M Navy Deal for P-8A Training Systems

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The Boeing Company (BA - Free Report) recently won a $194.5-million modification contract for production concurrency upgrades of P-8A Aircrew Training System, to support the U.S. Navy and the Australian government. The contract was awarded by the Naval Air Warfare Center Training Systems Division, Orlando, FL.

Details of the Deal

Under a cooperative agreement, the deal includes 80% of the work for the U.S. Navy and the remaining 20% for the government of Australia.

Work related to the deal will be performed in Jacksonville, FL; Whidbey Island, WA; Adelaide, Australia, Dallas, TX and St. Louis, MI.  The entire task related to the deal is expected to be completed by September 2023. Boeing will utilize fiscal 2016 aircraft procurement (Navy) and cooperative agreement funds for completing the task.

More on P-8A Aircrew Training Systems

Boeing’s P-8 training system provides comprehensive, realistic, aircrew training at a fraction of the cost of live aircraft training to the U.S. Navy. It provides combat-ready air, mission and maintenance crews in support of all platform missions, with a combination of equipment, software, courseware, personnel and logistical support. Boeing’s turnkey training solution accurately simulates aircraft and mission systems, permitting sophisticated mission rehearsals with unmatched realism.

What’s Favoring Boeing?

With rising demand for military aircraft like P-8As, providing valuable training to its aircrew has become crucial so that these jets can be utilized to their fullest capacity. Boeing, till date, has successfully delivered more than two dozen electronic classrooms to the U.S. Navy’s P-8A Integrated Training Center at its Jacksonville-based Naval Air Station. Furthermore, Boeing has also been at an advantageous position as the U.S. Navy uses its ground based P-8 Training system to complete up to 70% of required aircrew training. Thus, Boeing's P-8 Training system program enjoys a solid demand, which, in turn, is expected to boost inflow of orders from Pentagon, like the latest contract, concerning further modernization of such trainings so that the U.S. Navy remains more mission ready. Such contract inflows, in turn, should boost the company’s profit margin.

Last month, the Royal Australian Air Force (RAAF) opened a training facility worth $470 million for its new Boeing P-8A Poseidon maritime surveillance aircraft, which is expected to be the largest P-8 training facility outside the United States. Interestingly, toward the end of April, in an attempt to strengthen its maritime surveillance capabilities, the Australian government revealed its intentions of transitioning from Lockheed Martin's (LMT - Free Report) AP-3C Orion to Boeing's P8-A Poseidon under the Defense Department’s Phase 2B of Project Air 7000. Such developments have enhanced Boeing’s growth opportunities in the Australian aerospace market.

Price Movement

Boeing’s stock has gained 44.1 % in the last 12 months compared with the industry’s growth of 22.6%. 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 (AJRD - Free Report) and Engility Holdings (EGL - Free Report) .

While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Engility carries 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 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 moved up 16.1% to $2.02 in the last 90 days.

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