Boeing Wins $179M Deal To Aid Kuwait's Fleet Of F/A-18 Jets

The Boeing Company (NYSE:BA) recently won a contract for procuring system configuration set H12K to support Kuwait government’s fleet of F/A-18E/F Aircraft. Work related to the deal is scheduled to be completed by September 2022.

Details of the Deal

Valued at $179 million, the contract was awarded by the Naval Air Warfare Center Weapons Division, China Lake, CA. Per the terms of the deal, Boeing will procure H12K for software development, modification, integration and testing of the Kuwait Air Force configured F/A-18E/F Aircraft.

Work under the agreement will be executed in St. Louis, MO. The company will utilize foreign military sales (FMS) fund to complete the task.

A Brief Note on F/A-18

Boeing’s F/A-18 Block III Super Hornet is a twin-engine, supersonic, all weather multirole fighter jet. Notably, it serves as the U.S. Navy’s tactical and air superiority aircraft, being capable of performing virtually every mission 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 and tanker missions. The Super Hornet comes in two versions — the single-seat E model and the twin-seat F model.

What’s Favoring Boeing?

Boeing is one of the major players in the defense business and stands out among its peers by virtue of its broadly diversified programs, strong order bookings and solid backlog. In first-quarter 2018, revenues at its defense segment — Boeing Defense, Space & Security (BDS) — increased 13% year over year to $5.76 billion. This reflects solid volumes for international fighter jets and weapons. Moreover, the company’s backlog at BDS stood at $50 billion, 36% of which comprised orders from international clients.

Surely, the FMS contracts play a key role in driving Boeing’s operational performance. In fact, the company has been receiving increased number of contracts from Kuwait for its combat proven jets. Of late, Boeing’s secured a $1.2 billion contract for delivering 28 F-18 Super Hornets to Kuwait at the end of the first quarter. We believe such contracts including the latest one should further strengthen Boeing’s position in the expanding military market overseas.

Meanwhile, in February 2018, President Trump proposed fiscal 2019 defense budget that provisions for major war fighting investments worth $21.7 billion for aircraft. Boeing, being the largest aircraft manufacturer in the United States, will surely be a significant beneficiary from this proposed budget. The financial plan further includes an investment plan of $2 billion for procuring 24 F/A-18 aircrafts. Such proposed inclusions reflect solid growth prospects for the BDS segment, which in turn are likely to boost the company’s profit margin.

Price Movement

In a year’s time, Boeing has rallied about 79.8% compared with the industry’s increase of 34.6%. The outperformance was primarily led by the robust worldwide demand for its commercial aircraft and military jets.

Zacks Rank & Other Stocks to Consider

Boeing currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the same space include Northrop Grumman (NYSE:NOC) , Textron (NYSE:TXT) and Wesco Aircraft Holdings (NYSE:WAIR) . While Northrop Grumman sports a Zacks Rank #1 (Strong Buy), Textron and Wesco Aircraft Holdings carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman delivered an average positive earnings surprise of 13.87% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved north 5.65% to $16.44 in the last 90 days.

Textron came up with an average positive earnings surprise of 16.64% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings climbed 2.95% to $3.15 in the last 90 days.

Wesco Aircraft Holdings’ long-term growth rate is projected at 12%. The Zacks Consensus Estimate for 2018 earnings moved up 10% to 77 cents in the last 90 days.

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