The Boeing Co. BA may have witnessed weak profits in the fourth quarter of 2015, but it is never shy of scoring big at the Pentagon. Recently, this aerospace and defense behemoth has won a big modification contract from the U.S. Navy for the manufacture of Lot III full-rate production P-8A aircraft for the Navy and the international client. The contract is valued at $2.47 billion.
Per the contract, Boeing will implement an option for the construction and delivery of 20 Lot III full-rate production P-8A aircraft for the U.S. Navy (16 units) as well as for the Australian government (4 units). Additionally, Boeing will provide monitoring, change assessment and integrated baseline/program management reviews.
The contract is slated to be completed in Dec 2018. Boeing will carry out 80% of the work in Seattle, WA and the rest in Maryland, New York, Illinois, California, Utah and other continental U.S. locations as well as in the UK.
The P-8A Poseidon aircraft is mainly designed for long-range anti-submarine warfare, anti-surface warfare, and intelligence, surveillance and reconnaissance missions. The aircraft has been derived from Next-Generation 737-800s.
Given a better budget for the year, the major defense contractors are expected to witness pretty decent awards from the defense department. Recently, Boeing also received a contract to initiate preliminary design work on a new fleet of Air Force One presidential aircraft based on its 747-8 commercial airliner.
In Jan 2015, the Air Force first announced that Boeing's 747-8 would be used to replace the two Air Force planes for the U.S. president. These two planes are based on the Boeing 747-200 airliners.
Boeing’s Defense, Space & Security (BDS) segment registered approximately 3% year-over-year growth in its fourth quarter revenues to reach $7.79 billion. Backlog at BDS was $58 billion at the end of fourth-quarter 2015, 40% of which comprised orders from international clients.
The company expects 2016 defense revenues in the $28.5 billion to $29.5 billion range and operating margin of approximately 10%.
Zacks Rank
Boeing currently holds a Zacks Rank #3 (Hold). Leidos Holdings, Inc. LDOS, Wesco Aircraft Holdings, Inc. WAIR, Rockwell Collins Inc. COL are better-ranked stock in the same space. Leidos Holdings carries a Zacks Rank #1 (Strong Buy), while Wesco Aircraft and Rockwell Collins hold a Zacks Rank #2 (Buy).
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