The Boeing Co.’s BA business unit, Boeing Defense Space and Security, has won a fixed-price modification contract, worth $3.2 billion, from the U.S. Air Force to develop guidance systems for the Joint Direct Attack Munition (“JDAM”). Contracting activity is the Air Force Life Cycle Management Center, Hill Air Force Base, UT.
Per the contract, Boeing will provide “strap-on” inertial guidance kits that can gather guidance updates via Global Positioning System to enhance weapon precision for conventional inventory bombs of JDAM.
The contract covers foreign military sales. The deal was initially awarded on Oct 30, 2014 and had a value of $1.7 billion. Thereafter, it was increased by another $1.4 billion to account for the demand for warfighters and restocking depleted inventories.
Work is scheduled to be complete by Sep 29, 2020 and will be executed in St. Louis, MO. The contract will use fiscal 2015 and 2016 ammunition funds, and 2016 operations and maintenance funds.
According to the U.S. 2016 military budget, 7,000 JDAM munitions and 2,800 Hellfire missiles were allotted for all overseas contingency operations, including those in Afghanistan, Yemen and Somalia. Moreover, the U.S. Department of Defense (DoD) plans to buy around 14,000 JDAM bombs and 4,200 Hellfire missiles for domestic purposes.
We note that Boeing witnesses a steady flow of contracts from the U.S. DoD. The company is one of the major players in the defense business. Its defense business stands out among its peers by virtue of its broadly diversified programs, strong order bookings and order backlog.
Boeing’s Defense, Space & Security segment witnessed approximately 19% year-over-year growth in first-quarter 2016 revenues. Backlog at the segment was $56 billion at the end of the first quarter, of which 37% comprised orders from international clients.
Boeing currently has a Zacks Rank #3 (Hold).
Stocks to Consider
A better-ranked stock in the aerospace and defense industry is Engility Holdings, Inc. EGL, with a Zacks Rank #2 (Buy). Investors interested in the aerospace and defense equipment industry may also consider HEICO Corporation HEI and CAE Inc. CAE. Both the stocks carry a Zacks Rank #2.
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