Boeing Wins $430M Deal For Maintenance Support Of F/A-18 Jets

The Boeing Company (NYSE:BA) recently secured a delivery order to provide F/A-18 planned maintenance interval-1 high flight hour depot support. This is a five-year contract with no option periods.

Valued at $430 million, the contract was awarded by the Defense Logistics Agency Aviation, Philadelphia, PA. Work related to the deal will be carried out in Missouri, California, Florida and North Carolina and is expected to be completed by Mar 29, 2023.

Defense working capital funds for fiscal 2018 through 2023 will be utilized to finance the task.

A Brief Note on F/A-18

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.

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. Being the largest aircraft manufacturer in the United States, Boeing willsurely be a significant beneficiary once this budget gets Senate’s approval. The budget also includes an investment plan of $2 billion for procuring 24 F/A-18 aircrafts.

Notably, these developments, along with the latest contract win should provide impetus to Boeing’s defense segment’s growth, which generated revenues of $5.54 billion in the last reported quarter.

Price Movement

In a year’s time, Boeing’s stock has surged about 82.5 % compared with the broader industry’s gain of 44.6%. 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 sports a Zacks Rank #1 (Strong Buy). Some other stocks worth considering from the same space are Huntington Ingalls (NYSE:HII) , Northrop Grumman (NYSE:NOC) and Wesco Aircraft Holdings (NYSE:WAIR) . While Huntington Ingalls flaunts a Zacks Rank of 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 delivered an average positive earnings surprise of 3.85% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up by $5.44 to $17.38 in the last 90 days.

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

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

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