Boeing (BA) Wins $1.2B Deal To Support Kuwait's F/A-18 Jets

The Boeing Company (NYSE:BA) recently won a contract for providing long-lead non-recurring engineering to develop a baseline configuration for the production and delivery of 22 F/A-18E and 6 F/A-18F Super Hornets. These services will be rendered to the government of Kuwait.

Details of the Deal

Valued at $1.2 billion, the contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Per the terms, Boeing will offer long-lead radar warning receivers and aircraft armament equipment. The deal is expected to be completed by September 2022.

Majority of the work will be executed in Hazelwood, MI; Goleta and EL Segundo,CA; while the remaining portion will be carried out in different parts across the United States. Foreign military sales funds will be utilized to partially finance the task.

A Brief Note on F/A-18E/F

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 and tanker missions.

The F/A-18E and F/A-18/F are two varieties of the F/A-18 family of military jets.Boeing believes that the Super Hornet is the most cost-effective aircraft in the U.S. tactical aviation fleet, costing less per flight hour than any other tactical aircraft in U.S. forces inventory.

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. With aeroplanes being its flagship product, the company has been witnessing strong demand for its fighter aircraft and major aerospace programs, including the F/A-18 jets.

Evidently, the Fiscal 2018 budget required 80 Super Hornets over the next five years as part of the Future Years Defense Program, including funding for Research Development, Test & Evaluation for Block III capabilities. Moreover, the U.S. Navy added an additional 10 Super Hornets into the FY18 budget as its No. 1 unfunded priority.

Meanwhile, in February 2018, President Trump proposed fiscal 2019 defense budget that provisions for major war fighting investments of $21.7 billion for aircrafts. Boeing, being the largest aircraft manufacturer in the United States, will surely be a significant beneficiary once this budget gets Senate’s approval, which also includes an investment plan of $2 billion for procuring 24 F/A-18 aircrafts. Surely these developments, along with the latest contract win, will provide impetus to Boeing’s defense segment’s growth, which generated revenues worth $5.54 billion, in the last reported quarter.

Price Movement

Boeing’s stock has rallied about 85.6 % in a year, compared with the broader industry’s gain of 46.7%. The outperformance was primarily led by significant demand for its military jets along with robust worldwide demand for its commercial aircraft.

Zacks Rank & Other Stocks to Consider

Boeing currently sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked stocks in the same sector are Huntington Ingalls (NYSE:HII) , Northrop Grumman (NYSE:NOC) and Wesco Aircraft Holdings (NYSE:WAIR) . While Huntington Ingalls flaunts a Zacks Rank #1, Northrop and Wesco Aircraft hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls recorded an average positive earnings surprise of 3.85% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by $5.44 to $17.38 in the last 90 days.

Northrop recorded an average positive earnings surprise of 16.17% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by $1.72 to $15.25 in the last 90 days.

Wesco Aircraft recorded a positive earnings surprise of 25% in the last reported quarter. The Zacks Consensus Estimate for 2018 earnings has risen by 6 cents to 70 cents in the last 90 days.

Can Hackers Put Money INTO Your Portfolio?

Earlier this year, credit bureau Equifax (NYSE:EFX) announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.

Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.

Download the new report now>>