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Boeing (BA) Inks $240M Deal to Aid Missile Defense System

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The Boeing Company (BA - Free Report) recently secured a five-year, sole-source, cost-plus-award-fee contract (HQ0147-19-C-0001). Boing to provide the Missile Defense Agency support by performing highly complex technical systems engineering and integration requirements related to the Ballistic Missile Defense system.

Total value of this contract comes in at $240.2 million and is awarded by the Missile Defense Agency, Redstone Arsenal, AL. Work related to the deal will be performed at Huntsville, AL and is expected to be completed by Dec 14, 2023.

What Favors Boeing?

Increasing geo-political tensions across the globe have prompted nations to strengthen respective defense arsenal with technologically advanced ballistic missile systems. With these significant advancements, missile defense has steadily emerged to play a pivotal role in a nation’s defense strategy. To this end, the Boeing Defense, Space & Security (BDS) segment has been clinching frequent awards from the United States and international customers.

Notably, the company’s BDS segment recorded third-quarter 2018 net sales of $5.73 billion, reflecting a 13% improvement from the year-ago period. The segment contributed nearly 23% to total net sales in the reported quarter. Considering this, we may assume notable contracts like the latest one to fuel further growth in this segment.

Budgetary Advancements to Aid Boeing

Per Markets and Markets, rocket and missile market is projected to reach $70 billion during the 2017-2022 period at a CAGR of 4.74%.

President Donald Trump had proposed Pentagon fiscal 2019 defense budget in February 2018 that provisioned investments of $717 billion for rebuilding the U.S. military into a more capable, lethal and geared up Joint Force. Moreover, the defense budget provisioned a major war fighting capex of $21.7 billion for aircraft that further included an investment plan of $2 billion for procuring 24 F/A-18 Jets.

Such inclusions reflect solid growth for Boeing's BDS segment, which in turn, are likely to boost the company’s profit margin. Other companies, namely Lockheed Martin Corp (LMT - Free Report) , Northrop Grumman Corp (NOC - Free Report) and Huntington Ingalls Industries, Inc (HII - Free Report) are also envisioned to benefit from this budget revision.

Price Movement

Boeing’s stock has gained 5.9% in the past 12 months versus the industry’s decline of 15.1%.

Zacks Rank

Boeing currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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