Boeing (BA) Wins $1.1B Deal For Kill Vehicle Development

The Boeing Co. (NYSE:BA) has won a modification contract from the Missile Defense Agency (MDA) to procure Redesigned Kill Vehicle (RKV) development. It was awarded by the Missile Defense Agency, Huntsville, AL.

Contract Details

The contract is valued at $1.1 billion. In fact, with this modification the total cumulative face value of the contract reaches $5.8 billion from $4.7 billion.

Per the modification, Boeing will provide payload development, payload ground testing, integration with the Ground-based Interceptor (GBI) and Ground-based Midcourse Defense (GMD) Ground system, flight testing and four initial production RKVs for initial fielding.

Notably, the RKV development will be executed by a cross-industry team comprising Boeing, Lockheed Martin Space Systems Co., a unit of Lockheed Martin Corp. (NYSE:LMT) and Raytheon Co. (NYSE:RTN) .

Work is scheduled to be completed by Jun 30, 2022. It will be carried out at various locations including Huntsville, AL; Tucson, AZ; Sunnyvale, CA; other government designated sites; and other contractor designated prime subcontractor and supplier operating locations. The contract will use fiscal 2017 research, development, test and evaluation funds.

A Brief Note on RKV

The RKV is the next-generation, profitable solution that will leverage matured and established components for design simplification and reliability enhancement. The kill vehicles are used to destroy long-range ballistic missiles in space. These vehicles are launched at the top of the missiles and use sensors, lenses and rocket thrusters to pick out warheads and steer into their paths.

Why Boeing?

Boeing designs, develops, manufactures and integrates the GMD and GBI. In fact, it is the prime contractor of GMD development as well as sustainment contract. Moreover, the company’s subcontractors jointly have shown special potential and/or expertise to execute the essential services or deliveries without unacceptable delays in fulfilling the agency's requirements.

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

Recently, Boeing won a modification foreign military sales contract valued at $488.1 million from the U.S. Army to remanufacture 38 AH-64 Apache (NYSE:APA) aircraft.. Again, in April it secured a modification contract worth $168.8 million from the U.S. Air Force to upgrade F-15 Combined APG-63 Version 3 (V3) Radar Improvement Program and APG-82 Version 1 Radar Modernization Program (RMP) radar.

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

Price Movement

Shares of Boeing have rallied 45% over the last 12 months, outperforming the Zacks categorized Aerospace–Defense industry’s gain of 22.6%. 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 peers like Lockheed Martin and 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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