The Boeing Company BA recently secured a modification contract for providing non-recurring engineering support to incorporate the initial Block III capability for the production of F/A-18E/F and EA-18G aircraft. Majority of the task will be carried out in St. Louis, MO.
Valued at $75 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, MD. Boeing is expected to complete the deal by March 2021.
A Brief Note on F/A-18 and E/A-18
Boeing’s F/A-18 Block III Super Hornet is a twin-engine, supersonic, all-weather multirole fighter jet. The U.S. Navy’s tactical and air superiority aircraft is capable of performing virtually every mission in the tactical spectrum, including air superiority, day/night strike with precision-guided weapons, fighter escort, close air support, suppression of enemy air defenses, maritime strike, reconnaissance, forward air control, as well as tanker missions.
On the contrary, the EA-18G Growler is the most advanced airborne electronic attack (AEA) platform, which operates from either an aircraft carrier or land bases.
What’s Favoring Boeing?
Boeing, being one of the major players in the defense business, stands out among peers by the virtue of its broadly diversified programs, strong order bookings and solid backlog. Furthermore, the company’s expertise lies in programs related to a wide variety of aircraft components, repairs and modification work.
Considering Boeing’s combat-proven aerospace programs and associated services, along with the rapidly growing need for military aircraft in the light of enhancing geopolitical uncertainties worldwide, the company witnesses a steady inflow of orders from Pentagon. These contract wins, in turn, boost top-line growth of its defense business segment.
Evidently, third-quarter 2018 revenues from the Boeing Defense, Space & Security (BDS) segment, which manufactures military jets like F/A-18, EA-18 Growler and related components, increased 13% year over year to $5.73 billion. Following the trend, we expect the latest contract win to help this unit deliver similar top-line performance in the coming quarters.
Meanwhile, the fiscal 2019 defense budget kept provisions for major war fighting investments worth $21.7 billion for aircraft. Boeing, being the largest aircraft manufacturer in the United States, is surely going to be a significant beneficiary from the budget, which includes an investment plan of $2 billion for procuring 24 F/A-18E/F aircraft. Such inclusions reflect solid growth prospects for the BDS segment, which, in turn, are likely to boost its profit margin.
Price Movement
In the past 12 months, Boeing’s stock has gained 11.3% against the industry’s decline of 7%. The outperformance was primarily led by robust worldwide demand for its commercial aircraft and military jets.
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Zacks Rank & Other Stocks to Consider
Boeing currently carries a Zacks Rank #2 (Buy). Other top-ranked companies in the same sector include AeroVironment, Inc. AVAV, Teledyne Technologies Incorporated TDY and American Outdoor Brands Corporation AOBC. While AeroVironment and Teledyne Technologies sport a Zacks Rank #1 (Strong Buy), American Outdoor Brands holds the same Zacks Rank as Boeing. You can see the complete list of today’s Zacks #1 Rank stocks here.
AeroVironment delivered average positive earnings surprise of 257.01% in the trailing four quarters. The Zacks Consensus Estimate for fiscal 2019 earnings has moved 8.8% north to $1.48 per share over the past 90 days.
Teledyne Technologies delivered average positive earnings surprise of 12.92% in the preceding four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 5.3% to $9 per share over the past 90 days.
American Outdoor Brands delivered average positive earnings surprise of 64.88% in the trailing four quarters. The Zacks Consensus Estimate for fiscal 2019 earnings has been upwardly revised by 9% to 73 cents per share over the past 90 days.
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