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Boeing (BA) Secures a $248M Deal to Aid F/A-18 E/F Jet Program

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The Boeing Company (BA - Free Report) recently clinched a contract involving its F/A-18 E/F aircraft. The award has been offered by the Naval Supply Systems Command Weapon Systems Support, Philadelphia, PA.

Valued at $248.1 million, the contract is projected to be completed by May 2028. Per the terms of the deal, Boeing will provide for the repair of landing gear used on the F/A-18 E/F aircraft. A major portion of the work related to this contract will be carried out at St. Louis, MO; Fort Walton Beach, FL; and Longueui, Quebec, Canada.

What’s Favoring Boeing?

Nations worldwide are strengthening their military forces to address an increasingly complex global threat landscape due to rising geopolitical tensions and conflicts across various regions across the globe, along with increasing defense budget spending by developed and developing nations. As nations seek to bolster their aerial defense systems, the demand for technologically advanced military aircraft has risen sharply. This growing need has led to a surge in orders for leading combat aircraft manufacturers like Boeing.

To this end, Boeing's F/A-18 Super Hornet is particularly noteworthy, as it can perform nearly every mission within the tactical spectrum. These missions include air superiority, day/night precision strikes, fighter escort, close air support, suppression of enemy air defenses, maritime strike, reconnaissance, forward air control and tanker missions.

The latest model of this jet, Block III, currently being used by the United States, is the most networked and survivable F/A-18 built. Boeing delivered the first of 78 contracted Block III F/A-18 Super Hornets to the U.S. Navy in August 2021.
The superior capabilities of the F/A-18 aircraft must have resulted in a steady flow of contracts for Boeing, both for production and parts repair. The recent contract win is a bright example of that.

Boeing’s Growth Prospects

Amid the growing magnitude of the global threat landscape, the demand for military aircraft, which are crucial in varied military operations, has been surging significantly. With more nations focusing on increasing their aerial supremacy, coupled with the emergence of modern-day jets that come with more sophisticated technologies like enhanced stealth, precision targeting and electronic warfare capabilities, the global fighter aircraft market’s growth opportunities remain immense. This must have led the Mordor Intelligence firm to project a CAGR of 3.7% for the global fighter aircraft market between 2024 and 2029.

These projections suggest significant growth opportunities for leading combat jet manufacturers like Boeing. Notably, BA’s Defense, Space & Security division is involved in the research, development, production, and modification of both manned and unmanned military aircraft. The company’s military jet portfolio includes models, such as the F-15, P-8, T-7A Red Hawk, E/A-18G and C-17 Globemaster III, in addition to the F/A-18 jets.

Opportunities for Peers

Considering the aforementioned discussion, a few other defense contractors that can also be expected to gain substantially on virtue of their strong presence in the fighter aircraft market are discussed below.

Embraer (ERJ - Free Report) : The company’s product portfolio includes the A-29 Super Tucano light attack and advanced trainer and the C-390 Millennium military multi-mission aircraft.  In June 2024, Embraer delivered the second KC-390 multi-mission aircraft to the Portuguese Air Force (FAP). This reflects the solid demand that ERJ’s military jets enjoy in the fighter aircraft market. 

The Zacks Consensus Estimate for ERJ’s 2024 sales reflects a solid improvement of 19% from the 2023 reported actuals. The consensus estimate for its 2024 earnings reflects a solid improvement of 204.7% from the bottom line registered in 2023. 

Lockheed (LMT - Free Report) : Its product portfolio comprises some of the most advanced military aircraft like the F-35, C-130J Super Hercules, F-16 Fighting Falcon, F-22 Raptor and a few more. On Jul 25, 2024, Lockheed announced that Greece has become the newest member of the global alliance for its F-35 jets after finalizing its intention to procure 20 F-35 Lightning II aircraft and an option to procure another 20 jets. This should boost LMT’s revenues on the successful delivery of these jets. 

The consensus estimate for LMT’s 2024 sales reflects a solid improvement of 5.3% from the 2023 reported numbers. It has a long-term estimated earnings growth rate of 4.7%.  

Airbus Group (EADSY - Free Report) : Its military aircraft consists of the A400M, the C295 tactical transporter, the new-generation A330 Multi Role Tanker Transport and the Eurofighter, the most advanced swing-role fighter ever conceived. For more than 40 years, Airbus has also been providing its customers with an extended portfolio of military aircraft services, ranging from the training of Flight and Ground Crews to live firing exercises anywhere around the world.

The consensus estimate for EADSY’s 2024 sales reflects a solid improvement of 7.2% from the 2023 reported figure. It has a long-term estimated earnings growth rate of 13.9%. 

Price Movement

In the past six months, shares of Boeing have lost 11.5% against the industry’s growth of 2.9%.

Zacks Investment Research
Image Source: Zacks Investment Research

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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