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Boeing Wins $63M Navy Deal for F/A & E/A-18 Aircraft Support

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The Boeing Company (BA - Free Report) recently won a $62.7-million contract for providing inspections, Inner Wing Panel (IWP) modifications, and repairs for the F/A-18 E/F and EA-18G aircraft. Such designated efforts are expected to restore aircraft and IWP service life projections to new design specifications.

Work related to the deal will be majorly carried out in Jacksonville, FL; St. Louis, MI; and Lemoore, CA. The entire task related to the deal is expected to get completed in September 2019. The deal was awarded by the Naval Air Systems Command, Patuxent River, Maryland.

A Brief Note on F/A-18 and E/A-18

Boeing’s F/A-18 Block III Super Hornet is a twin-engine, supersonic, all weather multirole fighter jet. The U.S. Navy’s tactical and air superiority aircraft is capable of performing virtually every mission in the tactical spectrum, including air superiority, day/night strike with precision-guided weapons, fighter escort, close air support, suppression of enemy air defenses, maritime strike, reconnaissance, forward air control and tanker missions.

Whereas, the EA-18G Growler is the most advanced airborne electronic attack (AEA) platform, which operates from either an aircraft carrier or from land-bases.

What’s Favoring 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. Furthermore, the company’s expertise lies in programs related to wide variety of aircraft components, repairs and modification works.

Considering Boeing’s combat-proven aerospace programs and associated services along with the rapidly growing need for military aircraft in light of the enhancing geopolitical uncertainties worldwide, the company witnesses a solid inflow of orders from Pentagon. These contract wins, in turn, boost top-line growth for the company’s defense business segment.

Evidently, in second-quarter 2018, revenues at the Boeing Defense, Space & Security (BDS) segment, which manufactures military jets like F/A-18, EA-18 Growler and its related components, increased 9% year over year to $5.59 billion. In line with this, we may expect the latest contract win to help this unit deliver similar top-line performance, in coming quarters.

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. Boeing, being the largest aircraft manufacturer in the United States, will surely be a significant beneficiary from the budget, which further includes an investment plan of $2 billion for procuring 24 F/A-18E/F aircraft. Such inclusions reflect solid growth prospects for the BDS segment, which, in turn, are likely to boost Boeing’s profit margin.

Price Movement

Boeing’s stock has gained 53.4% in the past 12 months compared with the industry’s growth of 25.1%. The outperformance was primarily led by the robust worldwide demand for its commercial aircraft and military jets.



Zacks Rank & Key Picks

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

A few better-ranked stocks in the same sector are Heico Corp. (HEI - Free Report) , Wesco Aircraft Holdings (WAIR - Free Report) and Huntington Ingalls Industries (HII - Free Report) .

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

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.

Heico Corporation came up with an average positive earnings surprise of 2.15% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen 2.73% to $1.88 in the last 90 days

Wesco Aircraft delivered an average positive earnings surprise of 1.10% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 2.6% to 79 cents in the last 90 days.

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