Boeing To Deliver 75 737 Max Jets Worth $8.8B To Jet Airways

Per Reuters, The Boeing Company (NYSE:BA) recently entered into an agreement with the second largest Indian-based airline — Jet Airways — for delivering 75 737 MAX narrow body aircrafts. The deal is in line with Indian airlines’ latest rush to expand their fleets to meet the rising demand in the country for both domestic and international flights.

The deal value amounts to approximately $8.8 billion at current list prices which might get lower once the deal finalizes, as airlines typically receive a significant discount on big orders from manufacturers. However, it is still unknown whether the agreement was a formal order or a non-binding memorandum of understanding.

Boeing’s Prospects in India

Due to the increase in airborne passenger and cargo traffic, major airlines from all over the world, including Indian based airlines, are increasing their fleet size to meet the growing demand. According to the International Air Transport Association, the domestic Indian passenger traffic witnessed a 17.5% rise in January 2018 from the previous year.

In light of these developments, India has emerged as a promising market for Boeing, with the country expected to become the world’s fastest growing aviation market. According to the company, the country will need 2,100 new planes worth $290 billion in the next 20 years, up 13.5% from the year-ago estimate of 1,850 planes. Indian airlines currently have a fleet of 490 planes and ordered 880 more planes.

No doubt the latest deal with Jet Airways reflects the expanding jetliner demand in India and Boeing, being the largest jet maker in the world, will surely benefit from it.

Q4 Deliveries Driven by 737 Fleet

Boeing reported fourth-quarter 2017 commercial deliveries of 209 airplanes, up 13% year over year backed by higher demand for 737 and 747 jets. Sequentially, the numbers went up 3.5%. Delivery of the single-aisle 737 jet increased to 148 in the fourth quarter compared to 122 jets a year ago. This shows that the 737 fleet drives the company’s quarterly deliveries and order wins and the upcoming quarters will be no exception.

What’s Ahead for Boeing?

Per Boeing’s latest market outlook, the world will need 41,030 new planes, worth $6.1 trillion, between 2017 and 2036. The company expects single-aisle jets to be the major demand growth driver, comprising 72% of the total projection. This translates into worldwide demand for 29,530 single-aisle jets, worth $3.2 trillion, over the next 20 years.

Notably, with the 737 fleet leading the single-aisle jet space, we expect the company to win more such orders like the latest one, for this fleet in quarters ahead. This in turn will provide further impetus to Boeing’s Commercial Airplanes unit, which garnered revenues of $56.7 billion in 2017, driven by 763 and 737 MAX airplane deliveries.

Price Movement

Boeing’s stock has rallied about 85.1 % in a year, compared with the broader industry’s gain of 46%. The outperformance was primarily led by the robust worldwide demand for commercial and military jets.

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) and Curtiss-Wright Corporation (NYSE:CW) , each flaunting a Zacks Rank #1, and Northrop Grumman Corporation (NYSE:NOC) carrying 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.

Curtiss-Wright Corporation delivered an average positive earnings surprise of 15.06% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 60 cents to $5.79 in the last 90 days.

Northrop Grumman Corporation posted an average positive earnings surprise of 16.17% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by $1.73 to $15.25 in the last 90 days.

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