The Boeing Company’s BA business division, Defense, Space & Security, recently secured a foreign military sales (FMS) contract worth $6.2 billion. Per the terms of the deal, the company will procure 36 new F-15QA aircraft that will be provided to the Qatar Emiri Air Force.
The contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH and is scheduled to be over by Dec 30, 2022. FMS funds will be utilized to partially finance the work, which will be executed in St.Louis, MI.
A Brief Note on F-15
Boeing’s F-15 Strike Eagle is a twin-engine, all-weather tactical fighter aircraft. Its proven design is unbeatable in air-to-air combat, with more than 100 aerial combat victories. The F-15QA is a variant of F-15 that has been developed for the Qatar Air Force.
Our View
Boeing is one of the largest aerospace and defense contractors, with its defense business standing out among peers on virtue of its broadly diversified programs, strong order bookings and backlog.
In particular, among other defense equipment, the company’s forte has been combat-proven aircraft. So far, Boeing has manufactured more than 1,600 of the aircraft for six countries and none of them plan to retire the F-15, thereby indicating this jet’s enhanced sustainability. In 2016, the company delivered 15 F-15s, up 25% from the year-ago tally.
In October 2015, Boeing was selected by the U.S. Air Force as the prime contractor for its Eagle Passive Active Warning Survivability System program, which was initially valued at $4 billion. The program was developed to counter threats and protect air crew at an advanced level and aimed at upgrading F-15 aircraft. Needless to say, this reflects the popularity that this particular jet enjoys in the United States.
With rising security threats across the globe, apart from developed nations like the United States, developing economies like India, Qatar and a few more are ramping up their arsenal. Considering this we may expect further expansion of customer base for F-15, beyond its domestic realm, which in turn will boost Boeing’s profit from its defense business.
Moreover, the $700-billion worth fiscal 2018 defense policy bill that got sanctioned this September by the U.S. Senate, is expected to boost the business of the major U.S. defense contractors like Boeing, General Dynamics Corp. GD, Lockheed Martin Corp. LMT and Huntington Ingalls Industries, Inc. HII.
Price Performance
Boeing’s stock has moved up 87.4% over a year, outperforming the broader industry’s gain of 43.1%. This might have been led by the company’s strong balance sheet and cash flows which provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.
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Zacks Rank
Boeing currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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