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Boeing Wins $152M Deal to Build IRST Block II for F/A-18 Jets
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The Boeing Company (BA - Free Report) recently secured a contract to support the F/A-18E/F aircraft. Work related to the deal is scheduled to be over by December 2021.
Details of the Deal
Valued at $152.5 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Per the terms of the deal, the company will conduct designing, developing, integrating and testing of the Infrared Search and Track System (IRST) Block II, Phase II engineering change. These efforts will be carried out to replace the IRST Block I system.
Majority of the work will be executed in Orlando, FL. The company will utilize fiscal 2018 research, development, test and evaluation (Navy) funds to finance the task.
A Brief Note on F/A-18 and IRST
Boeing’s F/A-18 Block III Super Hornet is a twin-engine, supersonic, all weather multirole fighter jet. Considered as the U.S. Navy’s tactical and air superiority aircraft, F/A-18 can perform 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.
This Super Hornet aircraft is consistently evolving to outpace future threats. Its radar, mission computers and sensors are also continuously developing in order to meet extensive mission profiles.
IRST is a long-wave infrared detection system that targets airborne vehicles in a radar-denied environment. In the mid-2000s, Lockheed Martin (LMT - Free Report) was selected as the winner in the U.S. Navy’s F/A-18E/F IRST competition, which required 170 systems. These were the IRST Block I systems, which are capable of detecting, tracking and ranging targets with weapon-quality accuracy.
Now with the advanced version of this IRST system — the Block II version — set to get incorporated in the F/A-18 jets, these aircrafts will be able to perform better in terms of surveillance.
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. In second-quarter 2018, revenues at its defense segment — Boeing Defense, Space & Security (BDS) — increased 9% year over year to $5.59 billion. Among other defense equipment, the company’s key forte has been combat-proven aircraft.
Notably, Boeing has been winning a large number of contracts from the Pentagon for long, courtesy of its proven expertise in aerospace programs. It has been witnessing strong demand for its fighter aircrafts and major aerospace programs, including the F-18 jets. This is evident from the contract worth $217 million that it secured recently to deliver spare parts for the F/A-18 aircraft to Defense Logistics Agency Aviation. We believe this latest contract involving integration of the advanced IRST Block II systems will substantiate Boeing jet fighters’ strong position in the global market.
Meanwhile, in July 2018, the U.S. Senate approved the fiscal 2019 defense budget that provisions for major war fighting investments worth $21.7 billion for aircraft. Boeing, being the largest aircraft manufacturer in the United States, will surely be a significant beneficiary from the proposed budget. This financial plan further includes an investment plan of $2 billion for procuring 24 F/A-18 aircrafts.
Such proposed inclusions reflect possibilities of more such order inflows for Boeing’s F/A-18 jets, thereby mirroring solid prospects for the BDS segment. This, in turn, is likely to boost the company’s profit margin.
Price Movement
In a year’s time, shares of Boeing have soared about 48.9% compared with the broader industry’s rally of 23.2%. This outperformance can be primarily attributed to significant demand for its military jets along with robust worldwide demand for its commercial aircraft.
Engility exceeded the Zacks Consensus Estimate in the trailing four quarter, with an average beat of 19%. It has a long-term earnings growth rate of 5%.
Huntington Ingalls outpaced the Zacks Consensus Estimate in the trailing four quarter, with an average beat of 9.48%. It has a long-term earnings growth rate of 15%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Boeing Wins $152M Deal to Build IRST Block II for F/A-18 Jets
The Boeing Company (BA - Free Report) recently secured a contract to support the F/A-18E/F aircraft. Work related to the deal is scheduled to be over by December 2021.
Details of the Deal
Valued at $152.5 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Per the terms of the deal, the company will conduct designing, developing, integrating and testing of the Infrared Search and Track System (IRST) Block II, Phase II engineering change. These efforts will be carried out to replace the IRST Block I system.
Majority of the work will be executed in Orlando, FL. The company will utilize fiscal 2018 research, development, test and evaluation (Navy) funds to finance the task.
A Brief Note on F/A-18 and IRST
Boeing’s F/A-18 Block III Super Hornet is a twin-engine, supersonic, all weather multirole fighter jet. Considered as the U.S. Navy’s tactical and air superiority aircraft, F/A-18 can perform 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.
This Super Hornet aircraft is consistently evolving to outpace future threats. Its radar, mission computers and sensors are also continuously developing in order to meet extensive mission profiles.
IRST is a long-wave infrared detection system that targets airborne vehicles in a radar-denied environment. In the mid-2000s, Lockheed Martin (LMT - Free Report) was selected as the winner in the U.S. Navy’s F/A-18E/F IRST competition, which required 170 systems. These were the IRST Block I systems, which are capable of detecting, tracking and ranging targets with weapon-quality accuracy.
Now with the advanced version of this IRST system — the Block II version — set to get incorporated in the F/A-18 jets, these aircrafts will be able to perform better in terms of surveillance.
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. In second-quarter 2018, revenues at its defense segment — Boeing Defense, Space & Security (BDS) — increased 9% year over year to $5.59 billion. Among other defense equipment, the company’s key forte has been combat-proven aircraft.
Notably, Boeing has been winning a large number of contracts from the Pentagon for long, courtesy of its proven expertise in aerospace programs. It has been witnessing strong demand for its fighter aircrafts and major aerospace programs, including the F-18 jets. This is evident from the contract worth $217 million that it secured recently to deliver spare parts for the F/A-18 aircraft to Defense Logistics Agency Aviation. We believe this latest contract involving integration of the advanced IRST Block II systems will substantiate Boeing jet fighters’ strong position in the global market.
Meanwhile, in July 2018, the U.S. Senate approved the fiscal 2019 defense budget that provisions for major war fighting investments worth $21.7 billion for aircraft. Boeing, being the largest aircraft manufacturer in the United States, will surely be a significant beneficiary from the proposed budget. This financial plan further includes an investment plan of $2 billion for procuring 24 F/A-18 aircrafts.
Such proposed inclusions reflect possibilities of more such order inflows for Boeing’s F/A-18 jets, thereby mirroring solid prospects for the BDS segment. This, in turn, is likely to boost the company’s profit margin.
Price Movement
In a year’s time, shares of Boeing have soared about 48.9% compared with the broader industry’s rally of 23.2%. This outperformance can be primarily attributed to significant demand for its military jets along with robust worldwide demand for its commercial aircraft.
Zacks Rank & Key Picks
Boeing currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space include Engility Holdings and Huntington Ingalls (HII - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Engility exceeded the Zacks Consensus Estimate in the trailing four quarter, with an average beat of 19%. It has a long-term earnings growth rate of 5%.
Huntington Ingalls outpaced the Zacks Consensus Estimate in the trailing four quarter, with an average beat of 9.48%. It has a long-term earnings growth rate of 15%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>