Boeing (BA) Secures $240M Air Force Deal For AWACS Program

The Boeing Co. (NYSE:BA) has won a contract for the Royal Saudi Air Force (RSAF) airborne warning and control system (AWACS) modernization program phase 1. It has been awarded by the Air Force Life Cycle Management Center, Hanscom Air Force Base, MA.

Contract Details

Per the $240.2 million contract, Boeing will offer AWACS mission computing, navigation and communications upgrades as well as the next generation in identification, friend or foe enhancement designs. In addition, it covers foreign military sales to the Kingdom of Saudi Arabia.
Work will be carried out at Oklahoma City, OK and is scheduled to be completed by Feb 28, 2019.

A Brief Note on AWACS

Initiated in 1977, Boeing’s AWACS was derived from its 707 model. Markedly, the company’s 707-320B and the E-3 airframe based system deals with command and control, and surveillance and communications activities for strategic and defensive missions. Also, it has been used by the U.S. Air Force, Japanese Air Self Defense Force, North Atlantic Treaty Organization, RSAF, the UK, and the French Republic.

Why Boeing?

Boeing is one of the major players in the defense business and emerges by virtue of its broadly diversified programs, strong order bookings and solid backlog among its peers. In particular, the company’s key forte has been its combat-proven aircraft. Also, it has started developing military aerial refueling and strategic transport aircraft, of late. Notably, with its proven expertise in aerospace programs, Boeing has been clinching a huge number of contracts from the Pentagon for long.

In September, Boeing secured a modification contract worth $600 million to provide new preliminary design activity requirements for the Presidential Aircraft Recapitalization program. Again, it won a $676.6 million deal to offer full-rate production of six Lot 41 F/A-18E and eight F/A-18F aircraft. Going forward, we expect these recently won contracts to add impetus to the company’s growth trajectory.

Additionally, recent Senate approval for the $700 billion National Defense Authorization Act indicates significant inflow of contracts for the front-row defense stocks in the United States. This, in turn, might prove to be beneficial for defense majors like Boeing, Lockheed Martin Corp. (NYSE:LMT) , General Dynamics Corp. (NYSE:GD) and Huntington Ingalls Industries, Inc. (NYSE:HII) in the near term.

Price Movement

Shares of Boeing have skyrocketed 93.8% in the last 12 months, outperforming the industry’s gain of 54.4%. This impressive performance can be attributed to the company’s strong balance sheet and cash flows that provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.

Zacks Rank

Boeing carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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