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Boeing (BA) Wins $25M Navy Deal to Support P-8A Poseidon

Boeing’s P-8A Poseidon is designed for long-range anti-submarine warfare, maritime surveillance and reconnaissance missions, capable of broad-area maritime and littoral operations.

The Boeing Company BA recently secured a $24.8 million contract for procuring the Advanced Airborne Sensor (AAS) Peculiar Support Equipment (PSE) to support the U.S. Navy’s P-8A Poseidon maritime surveillance aircraft. Work related to the deal is expected to complete in March 2022.

Details of the Deal

Per the terms, Boeing will provide logistics and engineering data for the PSE. Moreover, through this deal, the aircraft giant will offer product support analysis, training information, technical manuals and proof-load documentation. These capabilities will enable Naval Air Warfare Center, Aircraft Division Lakehurst, in analyzing source data, activating organic support and allowing the Naval Supply Systems Command to provision the PSE.

The contract was awarded by the Naval Air Warfare Center Aircraft Division, Lakehurst, NJ. Majority of the work will be carried out in Richardson, TX. Boeing will utilize fiscal 2016 aircraft procurement (Navy) funds for completing the task.

What’s P-8A Poseidon?

Boeing’s P-8A is an aircraft designed for long-range anti-submarine warfare, anti-surface warfare, maritime surveillance and reconnaissance missions, capable of broad-area maritime and littoral operations. It is also effective at search and rescue missions. P-8 is a derivative of the Next-Generation 737-800, which combines Superior performance and reliability with an advanced mission system that ensures maximum interoperability in the future battle space.

A Brief Note on AAS and PSE

The AAS is multi-function radar installed on the P-8 Poseidon aircraft, designed to provide multi-function detection and tracking of moving targets, and high resolution ground mapping of land, littoral and water areas.

On the other hand, Peculiar Support Equipment (PSE) supports the P-8 Poseidon along with other major aircraft programs by offering flight line and intermediate maintenance level test equipment as well as automated test equipment for the complete range of aircraft systems.

What’s Favoring Boeing?

Boeing, being one of the major players in the defense business, stands out among its peers by virtue of its broadly diversified programs, strong order bookings and solid backlog. Its defense segment, known as Boeing Defense, Space & Security (BDS), witnessed approximately 13% year-over-year increase in first-quarter 2018 revenues to $5.76 billion, driven by higher weapons deliveries. We believe, the latest contract, along with the other notable ones that the company won in recent times, will allow the BDS segment to reflect similar solid results in upcoming quarters as well.

In particular, among other defense equipments, Boeing’s key forte lies in the development of combat-proven aircraft such as the P-8A Poseidon. Also, the company has lately started developing military aerial refueling and strategic transport aircraft, for its fixed-wing military aircraft programs. Such capabilities have enabled Boeing in clinching a huge number of contracts from the Pentagon on a frequent basis.

Meanwhile, President Trump proposed fiscal 2019 defense budget in February that provisioned major war fighting investments of $21.7 billion for aircrafts. Further, it also included an investment plan of $2.2 billion for 10 P-8A Poseidon Jets. Such proposed inclusions reflect solid growth prospects for the BDS segment, which in turn are likely to boost the company’s profit margin.

Price Movement

Boeing’s stock rallied about 92.8 % in a year compared with the industry’s gain of 42%. The outperformance was primarily led by the robust worldwide demand for its commercial aircraft and for its military jets.

Zacks Rank & Key Picks

Boeing currently carries a Zacks Rank #2 (Buy). A few top-ranked stocks in the same sector are AeroVironment, Inc. AVAV, L3 Technologies Inc. LLL and Wesco Aircraft Holdings, Inc. WAIR.

While AeroVironment sports a Zacks Rank #1 (Strong Buy), L3 Technologies and Wesco Aircraft Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AeroVironment delivered an average positive earnings surprise of 147.43% in the last four quarters. The company’s long-term growth rate is pegged at 20%.

L3 Technologies recorded an average positive earnings surprise of 7.42% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 2.2% to $9.67 in the last 90 days.

Wesco Aircraft Holdings’ long-term growth rate is pegged at 12%. The Zacks Consensus Estimate for 2018 earnings has risen by 10% to 77 cents in the last 90 days.

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