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Boeing (BA) Wins $45M Air Force Contract for Supporting JDAM

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The Boeing Company (BA - Free Report) recently won a $45-million modification contract for providing Joint Direct Attack Munition (JDAM) technical support and integration. It will further support studies and analysis, and product improvement and upgrades.

The contract was awarded by the Air Force Life Cycle Management Center, Eglin Air Force Base, Florida. Work related to the deal will be performed in St. Louis, MO, and is scheduled to be completed by Mar 31, 2019.

JDAM Specifics

The Joint Direct Attack Munition (JDAM) is a low-cost guidance tail kit that converts existing unguided free-fall bombs into accurately guided weapons. With the help of the JDAM, bombs can be accurately delivered in any weather conditions and be launched at a great distance from the target. The U.S. Air Force, Navy and the militaries of more than 26 nations employ the JDAM.

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. The company’s expertise also lies in programs related to wide variety of aircraft components, technical support and modification works.

Considering Boeing’s combat-proven aerospace programs and associated services, the company witnesses a solid inflow of orders from Pentagon and its overseas allies. These contract wins boost top-line growth for the company’s defense business segment.

Evidently, in second-quarter 2018, revenues at its Boeing Defense, Space & Security (BDS) segment, which manufactures the JDAM tail kits, increased 9% year over year. In line with this, we may expect the latest contract win to enable this unit to 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 $4.6 billion for Preferred Ammunitions. Boeing, being one of the defense majors in the United States, will surely be a significant beneficiary from the budget, which further includes an investment plan of $1.2 billion for developing 43,594 JDAM kits.

Looking Ahead

Per Grand View Research, the global ammunition market is expected to see a CAGR of 3.5% by 2024 to $16 billion. Such growth can be attributed to the rise in terrorism activities accompanied by stacking of arms and weapons in emerging economies, owing to rising defense expenditures. This, in turn, should enable Boeing to significantly grow in the expanding market in the days to come.

Price Movement

Boeing’s stock has gained 50.7% in the past 12 months compared with the industry’s growth of 23.8%. 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) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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 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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