Boeing Wins $50M Navy Deal To Aid F/A-18E/F & EA-18G Jets

Aerospace giant, The Boeing Company (NYSE:BA) , has secured a modification contract against a previously issued basic ordering agreement, from the Naval Air Systems Command, Patuxent River, MD. Work related to the new order is scheduled to be over by June 2020.

Details of the Deal

The contract is valued at $49.5 million. This new order incorporates an engineering change proposal. According to it, Boeing will develop, qualify, and flight test form-fit-function requirements of the pre-processor module – the Active Electronically Scanned Array Radar Interface 2 and the sensor hardware encapsulation layer narrowband controller weapons replaceable assemblies.

These defense equipments will be delivered to the U.S. Navy and the Australian government for their fleet of F/A-18E/F and EA-18G aircraft. The majority of the work will be performed in El Segundo, CA. The rest will be done at Forest, MS; Andover, MA; and St. Louis, MO. The contractor will utilize fiscal 2015 and 2017 aircraft procurement (Navy) funds as well as foreign military sales (FMS) funds to execute this order.

A Brief Note on F/A-18E/F & EA-18G Jets

Boeing’s F/A-18 Super Hornet – a twin-engine, supersonic, all weather multirole fighter jet – is the U.S. Navy’s primary strike-and-air superiority aircraft. It is capable of landing and taking off from an aircraft carrier. F/A-18/E is a single-seat and F/A-18/F is a twin-seat variant of the Super Hornet. These are about 25% larger than its predecessor, the F/A-18C/D, but comparatively contain 42% lesser structural parts.

On the other hand, Boeing’s EA-18G Growler is the most advanced Airborne Electronic Attack (AEA) aircraft that operates either from an aircraft or from land bases. It integrates advanced AEA capabilities that have been developed and manufactured by Northrop for the purpose of identifying, degrading and destroying hostile radar-guided air defense and communication systems.

Our View

With the meteoric rise of the Islamic State of Iraq and Syria (ISIS) in the past few years and more developing nations increasing their share of defense spending, the international market for defense equipment has been growing. This, in turn, has helped drive sales in the Aerospace-Defense industry.

Being one of the major players in the defense business, Boeing’s key forte has been combat-proven aircraft. Also, it has started developing military aerial refueling and strategic transport aircraft of late. Banking on its proven expertise in aerospace programs, Boeing has been clinching a huge number of contracts from the Pentagon for long.

To this end, Boeing recently secured a FMS contract worth $410.9 million to provide 38 Apache (NYSE:APA) aircraft, three Longbow crew trainers and associated spares to the U.K. government. Moreover, it won a $475 million contract to provide intelligence, surveillance and reconnaissance (ISR) services in support of the Mid-Endurance Unmanned Aircraft Systems (MEUAS) program, at multiple locations across the globe. In this regard, we expect the recently won contract to add further impetus to the company’s defense business’ growth trajectory.

Price Movement

Shares of Boeing have rallied 53.7% over the last 12 months, outperforming the Zacks categorized Aerospace–Defense industry’s gain of 25.6%. This could be because the company’s strong balance sheet and cash flow provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions. The company also poses tough competition to its defense peers like Lockheed Martin Corp. (NYSE:LMT) , Northrop Grumman Corp. (NYSE:NOC) 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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