The Boeing Company (BA - Free Report) recently won a $375.6-million contract for the replacement of UH-1N helicopters, also widely known as the Huey choppers, with four MH-139 helicopters. The contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, Ohio.
Details of the Deal
The latest deal is a sub-contract of a $2.38-billion contract, under which Boeing will provide up to 84 MH-139 helicopters, training devices and associated support equipment. Work related to the recent contract will be executed in Ridley Park and Philadelphia, PA.
The entire task is expected to get completed by September 2031, provided all options are exercised. Boeing will utilize fiscal 2018 research, development, test, and evaluation funds for the task..
A Brief Note on MH-139 Helicopters
Boeing's MH-139 provides a capable, affordable, and ready to serve platform for the U.S. Air Force’s UH-1N Replacement Program. Based on the U.S. Air Force requirements, this military helicopter is proven to excel in the most grueling environments across the globe. The new MH-139 will be able to carry nine fully loaded troops, and should be able to hit 135 knot cruise speed and fly a minimum distance of 225 nautical miles, without being refueled for at least three hours.
Why MH-139 Helicopters Over UH-1N Huey Choppers?
The civilian version of the MH-139 Helicopters is already being used by 250 governments all over the world. It possesses an expected life cycle of 30 years and will be instrumental to the U.S. Air Force in saving about a billion dollars in terms of buying and operating. Furthermore, the MH-139 is expected to be more effective in patrolling and protecting land-based nuclear weapons compared to the aging UH-1N choppers.
The existing UH-1N choppers, on the other hand, have become increasingly difficult to maintain and is no more the preferred choice in situations of responding to a nuclear emergency.
What Favors Boeing?
Boeing, being one of the major players in the defense business, stands out among its peers by virtue of its broadly diversified programs, strong order bookings and solid backlog. A golden era for major defense contractors like Boeing has emerged, as nations (both developed and developing) are looking to enhance their defense strength, which is threatened by global geopolitical tensions. The latest contract is a testament to that and should bode well for the company’s defense unit, which registered a decent 9% year-over-year top-line growth in second-quarter 2018.
Furthermore, 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. Boeing, being the largest aircraft manufacturer in the United States, should be a significant beneficiary from the latest budget, which, in turn, is likely to boost its profit margin, going ahead.
Boeing’s stock has gained 44.7% in the last 12 months compared with the industry’s growth of 22.9%. 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 top-ranked stocks in the same sector are Aerojet Rocketdyne Holdings (AJRD - Free Report) , Engility Holdings (EGL - Free Report) and Huntington Ingalls Industries (HII - Free Report) .
While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Huntington Ingalls and Engility 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 30.9% to $1.27 in the last 90 days.
Engility 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.
Huntington Ingalls pulled off an average positive earnings surprise of 9.48% for the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 6.4% north to $17.24 in the last 90 days.
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