Aerospace major The Boeing Co. (BA) was the biggest winner from Pentagon’s funding list of Mar 4, 2014. The company won a sizeable $1.16 billion contract modification to supply the U.S. Army with AH-64E Apache helicopters.
Per this contract, Boeing will remanufacture 72 Apaches as well as build and deliver 10 wholly new Apaches for the Army. The company will also refresh five crew trainers, refurbish one crew trainer and provide integrated logistics support, ground support equipment, spare parts, and perform engineering work on the helicopters. The work on this contract is to be completed by Jun 30, 2016, and will be performed in Mesa, Ariz. Army Contracting Command.
In the fourth quarter 2013, Boeing Defense, Space & Security segment revenues increased approximately 6% year over year to $8,855 million. Quarterly operating margin also expanded 180 basis points year over year to 10.8%.
Although the threat of defense cutbacks will loom over the company going forward, Boeing still remains optimistic with a 2014 defense revenue target of $30.0 billion to $31.0 billion and an operating margin of approximately 9.5%.
With the gradual strengthening of the global economy and the budget issues drawing to an end, the defense majors are expected to see stability in 2014. These companies are also on the lookout for more international contracts, commonly referred to as foreign military sales, to keep their top lines rolling.
The $1.1 trillion Omnibus spending measure that President Obama signed into law recently was a big relief for the Pentagon. The bill provides Pentagon with nearly $93 billion to buy weapons and another $63 billion for research and development. Add to this the growing commercial opportunities, thanks to an improving global economy, aging commercial aircraft at most airlines and an inevitable rise in commercial aircraft orders.
Boeing currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the aerospace and defense industry include Huntington Ingalls Industries, Inc. (HII), Embraer SA (ERJ) and Lockheed Martin Corporation (LMT). While Huntington Ingalls carries a Zacks Rank #1 (Strong Buy), Embraer and Lockheed hold a Zacks Rank #2 (Buy).
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