Boeing (BA) Wins $195M Air Force Contract for JDAM Tail Kits

The Boeing Co. BA recently won a $195-million modification contract for providing Joint Direct Attack Munition (JDAM) tail kits. The contract has been awarded by the Air Force Life Cycle Management Center, Hill Air Force Base, Utah.

Details of the Deal

Per the terms, Boeing’s Defense Space and Security segment will manufacture additional JDAM tail kits. Notably, the cumulative value of the contract may go up to $927.6 million, if the options included in the contract are exercised.

Work related to the deal will be performed in St. Louis, MO, and is scheduled to be completed by Jan 30, 2020. Boeing will utilize fiscal 2016, 2017 and 2019 procurement funds to finance the order.

A Brief Note on JDAM

The JDAM is a low-cost guidance tail kit that converts existing unguided free-fall bombs into accurately guided "smart" weapons. The JDAM kit consists of a new tail section that comprises an inertial navigation system/global positioning system (INS/GPS) and body strakes for additional stability and lift. With the help of JDAM, bombs can be accurately delivered in any weather conditions.

The U.S. Air Force, U.S. Navy and militaries of more than 26 countries employ JDAM. Its first operational use was during Operation Allied Force in the Balkans in 1999. JDAM has been used extensively in Operation Enduring Freedom (OEF) and Operation Iraqi Freedom (OIF) and most recently in NATO’s Operation Unified Protector in Libya.

Our View

Boeing’s Defense Space and Security segment has reflected a solid year in terms of revenues and margins along with securing some key awards and achieving critical program milestones, including its ongoing progress on the tanker program.

Evidently, during the fourth quarter, Boeing’s Defense Space and Security business clinched a massive $10 billion of new orders that included foreign military sales contracts worth $6.2 billion from the Qatar Emiri Air Force.

Considering the $700-billion fiscal 2018 defense policy bill sanctioned last September by the U.S. Senate, a smooth inflow of orders for Boeing’s defense products and equipment is expected.

Moreover, the company has of late been witnessing solid funding support above the President's budget request for a number of programs, including the F-18, CH-47 Chinook, Ground-Based Midcourse Defense, AH-64 Apache, the V-22 and space launch system. Thus, we expect Boeing to win more defense contracts in the days to come, which in turn will help it maintain its position as one of the largest aerospace and defense contractors worldwide.

Boeing Company (The) Price and EPS Surprise

 

Boeing Company (The) Price and EPS Surprise | Boeing Company (The) Quote

 

Price Movement

Boeing’s stock has rallied about 112.8% in a year, compared with the broader industry’s gain of 57.2%. The outperformance was primarily led by significant demand for its military jets and commercial aircraft.

Zacks Rank & Other Key Picks    

Boeing carries a Zacks Rank #1 (Strong Buy). A few other top-ranked stocks in the same sector are Lockheed Martin LMT, Huntington Ingalls Industries HII and Spirit Aerosystems SPR, each of which sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lockheed Martin posted an average positive earnings surprise of 4.62% for the past four quarters. The Zacks Consensus Estimate for first-quarter 2018 earnings rose by 39 cents over the last 60 days.

Spirit Aerosystems has an average positive earnings surprise of 9.76% for the last four quarters. The Zacks Consensus Estimate for first-quarter 2018 earnings rose by 12 cents in the last 60 days.

Huntington Ingalls posted an average positive earnings surprise of 14.22% for the last four quarters. The Zacks Consensus Estimate for first-quarter 2018 earnings has risen by 4 cents in the past 60 days.

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