Boeing Co. (BA) is now looking towards the Asian and Mid-East defense markets for growth in an effort to counter domestic defense budgetary pressure as well as offset the shortfall in orders stemming from the austerity drive of the European countries and the U.S.
In this scenario, the Asian and Mid-East markets could be a saving grace for Boeing to boost its international defense sales. The company is hoping to increase defense sales outside the U.S. to about 25% of its revenue by 2013, up from 17% last year.
Two big Asian players, China and India, have increased their defense budgets for 2011. China has decided to spur its defense spending for 2011 to $91.5 billion, a growth of 12.7% from 2010, while India has raised its defense spending for 2011 to $36.3 billion, up 11.6% year over year. Boeing will be looking eagerly to grab opportunities in these emerging defense markets to increase its defense revenues.
Boeing also supplies fighter jets, transport planes and attack helicopters to governments of Japan, Singapore and Saudi Arabia. Boeing has plans to entrench its presence in India and enter into profitable partnerships, as contracts from India can generate $31 billion in defense revenue for Boeing in the coming decade.
The Republic of Korea too is a lucrative defense destination for Boeing. Only this month the company delivered 2 F-15K Slam Eagle aircraft to the Republic of Korea Air Force (ROKAF), a part delivery of 21 F-15Ks belonging to the Next Fighter II contract entered upon in 2010. Boeing has plans to bid for the 60 fighter jet contract, which the Republic of Korea is going to announce in the first quarter of 2012.
Boeing clocked total revenue of $64 billion in fiscal 2010, half of which came from defense deals. A similar trend is expected in 2011 with roughly $31.5–$33 billion in revenues coming from defense contracts out of the total estimate of $68–$71 billion.
Chicago-based Boeing Co. currently has a Zacks #3 Rank (short-term Hold rating). We also maintain a long-term Neutral rating on the stock. The company competes with the likes of General Dynamics Corp. (GD), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC).
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