The U.S. Department of Defense (DoD) disbursed 52 separate contracts on Sep 24, 2013. One of the awardees, The Boeing Company (BA) received three contracts worth $284.3 million. This comes as some consolation to the defense major as it has been smarting under the lost billion-dollar Korean deal.
Per the first contract, worth $225 million, the company will provide six operational flight trainers, six weapons tactics trainers, two part-task trainers, one training systems support center, three 10-seat electronic classrooms, and one 20-seat electronic classroom to the U.S. Navy. These trainers and classrooms will be used by the Navy to train to operate the P-8A Poseidon subhunting aircraft. This modification contract is scheduled to be completed by Mar 2018.
The company received another contract to supply and support approximately 48 Lot 3 remanufacture, Lot 3 new-build, and Lot 4 remanufactured Apache Block III attack helicopters to the U.S. Army. This is a firm-fixed-price, option-eligible, non-multi-year contract worth $52.4 million.
The third contract worth $6.9 million calls for the company to perform non-recurring engineering work required for upgrades to AN/APG-79 active electronically scanned array radio detection hardware, and ranging general purpose processors used aboard Navy F/A-18 fighter-bombers and EA-18G electronic warfare aircraft.
The steady flow of contracts at both its commercial as well as defense division would help the company to overcome the uncertain fate of high-cost programs, risks related to key project executions and order cancellations.
Recently, the company faced one such sizeable order cancellation. South Korea denied offering Boeing a $7.7 billion contract for its F-15 Silent Eagle fighter jets. Boeing was rumored to have almost clinched the order for the fighter jet ahead of Lockheed Martin Corp.’s (LMT) F-35 and Eurofighter’s Typhoon on the basis of its lower cost. However, pressure to invest in more advanced planes has compelled the South Korean government to reconsider the case. The probability of the company winning the deal had propelled the company’s share price by 3.9% on Sep 16, 2013. Any such future cancellations would pose a threat to the company’s top line.
Boeing presently retains a short-term Zacks Rank #3 (Hold). Among the stocks worth considering in the space are Lockheed Martin, Alliant Techsystems Inc. (ATK) and Northrop Grumman Corp. (NOC). While Alliant Techsystems carries a Zacks Rank #1 (Strong Buy), Lockheed Martin and Northrop Grumman hold a Zacks Rank #2 (Buy).
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