Boeing (BA) Secures $488M FMS Contract For UK From US Army

The Boeing Co. (NYSE:BA) has won a modification foreign military sales (FMS) contract from the U.S. Army for the U.K. The contract is valued at $488.1 million. It was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL.

Contract Details

Per the contract, Boeing will remanufacture 38 AH-64 Apache (NYSE:APA) aircraft, and procure three Longbow crew trainers and associated spares.

Work is scheduled to be completed by May 31, 2024 and will be executed in Mesa, AZ. The contract will use fiscal 2010 other funds.

A Brief Note on AH-64E Apache Helicopter

Boeing’s AH-64 Apache is the world’s most advanced multi-role combat helicopter and is used by the U.S. Army and a growing number of international defense forces. The company has delivered more than 2,200 Apache helicopters to customers around the world.

Notably, AH-64E is the latest version of the AH-64 gunship and is equipped with new sensors, avionics and improved night operation capabilities. Further, it has infra-red suppressing exhaust system as well as chaff and flare dispensers, which jointly reduces the chance of being hit by enemy air defense missiles.

The Longbow Crew Trainer is the main focus of training for the AH-64 Apache helicopters. Pilots and other personnel use this high-fidelity flight simulator to practice aircraft procedures and prepare for missions.

Our View

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. The company witnesses a steady flow of contracts from the Pentagon and other international customers.

In particular, among other defense equipment, the company’s forte has been combat-proven aircraft. Designed in 1972, to meet the U.S. Army's need for an AAH (Advanced Attack Helicopter), Boeing’s AH-64A has taken supremacy over the world's premier attack helicopter from Textron Inc.’s (NYSE:TXT) Bell AH-1 Cobra. During the first quarter of 2017, the company delivered 65 new and remanufactured AH-64 helicopters.

With its proven expertise in aerospace programs, the company has been gaining a huge number of contracts from the Pentagon. In terms of international demand, the government of Saudi Arabia purchased lot 7-11 of AH-64E Apache attack helicopters through the U.S. Army. The deal is valued at $3.28 billion.

Again, the United Arab Emirates (UAE) requested for a purchase of 37 Apaches and a few other of its defense equipment and that of Lockheed Martin Corp. (NYSE:LMT) in Dec 2016. The total value of this deal is pegged at $3.5 billion, which on approval will surely boost international revenues of both these defense majors.

Meanwhile, Trump’s proposal to boost the nation’s defense budget by 10% in 2018 from 2016 is likely to benefit defense biggies like Boeing.

Price Movement

Shares of Boeing have gained 38.3% over the last 12 months, outperforming the Zacks categorized Aerospace–Defense industry’s gain of 20.3%. This could be because the company’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions. The company also poses strong competition to its peer − General Dynamics Corp. (NYSE:GD) .

Zacks Rank

Boeing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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