Aircraft major The Boeing Company BA secured a modification contract from the U.S. Army for supplying lot 7-11 of AH-64E Apache attack helicopters to the government of Saudi Arabia. Work related to this multi-year deal is expected to be over by Jun 30, 2022.
Details of the Deal
Valued at $3.28 billion, this foreign military sales (FMS) contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL. Boeing plans to utilize fiscal 2010, 2017, 2018, 2019, 2020 and 2021 other procurement (Army) funds to complete this deal.
Per the terms of the agreement, Boeing will offer full-rate production of remanufactured aircraft and new build aircraft, remanufacture and new build Longbow crew trainers, peculiar ground support equipment, initial spares, integrated logistics support, and engineering technical services. The company will carry out the work for this contract in Mesa, AZ.
A Brief Note on AH-64E Apache Helicopter
Boeing’s AH-64 Apache is the world’s most advanced multi-role combat helicopter and is used by the U.S. Army and a growing number of international defense forces. The company has delivered more than 2,200 Apache helicopters to customers around the world.
AH-64E is the latest version of the AH-64 gunship and is equipped with new sensors, avionics and improved night operation capabilities. Further, it hasinfra-red suppressing exhaust system as well as chaff and flare dispensers, which jointly reduce the chance of being hit by enemy air defense missiles.
Boeing is one of the largest aerospace and defense contractors, with its defense business standing out among peers on virtue of its broadly diversified programs, strong order bookings and backlog. Notably, the company’s Defense, Space & Security segment witnessed healthy revenues and margins during 2016, apart from making substantial progress on critical program milestones, including the first flight of its T-X trainer aircraft.
In particular, among other defense equipment, the company’s forte has been combat-proven aircraft. Designed in 1972, to meet the U.S. Army's need for an AAH (Advanced Attack Helicopter), Boeing’s AH-64A has taken supremacy over the world's premier attack helicopter from Textron Inc.’s TXT Bell AH-1 Cobra. During 2016, the company delivered 31 new AH-64 helicopters, up 34.8% from the year-ago number.
With its proven expertise in aerospace programs, the company has been gaining a huge number of contracts from the Pentagon. In terms of international demand, the United Arab Emirates (UAE) requested for a purchase of 37 Apaches and a few other of its defense equipment and that of Lockheed Martin Corp. LMT in Dec 2016. The total value of this deal is pegged at $3.5 billion, which on approval will surely boost international revenues of both these defense majors.
Meanwhile, Trump’s proposal to boost the nation’s defense budget by 10% in 2018 from 2016 is likely to benefit defense biggies like Boeing.
Boeing gained about 36.8% in the last one year, outperforming the Zacks categorized Aerospace/Defense industry’s gain of 27.2%. This might have been triggered by the rising international demand for Boeing’s defense products, in particular for rotorcraft, commercial derivatives, fighters, satellites and services in the Asia Pacific as well as Gulf nations, as they have been strengthening their defense budgets of late. Moreover, the company’s earnings are expected to grow 13% over the next five years, indicating further upside for this stock. The company also poses strong competition to peers like Lockheed Martin and Airbus Group SE EADSY.
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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