Boeing Secures a $1.7B Contract to Deliver P-8A Poseidon Aircraft

The Boeing Company BA recently clinched a modification contract for the procurement and delivery of seven of its P-8A Poseidon aircraft. The award has been provided by the Naval Air Systems Command Patuxent River, MD. 

Valued at $1.68 billion, the contract is expected to be completed by September 2030. The majority of the work related to this deal will be carried out in Seattle, WA.

What’s Favoring BA Stock?

Rising global security challenges, including Russia’s invasion of Ukraine and prolonged unrest in parts of the Middle East, have compelled nations to upgrade their defense capabilities. With aerial security being a cornerstone of national defense, the focus on acquiring technologically advanced patrol aircraft like Boeing’s P-8A jets has been increasing lately. 

Notably, the P-8 is a multi-mission maritime patrol aircraft, excelling at anti-submarine warfare, anti-surface warfare, intelligence, surveillance and reconnaissance, and search and rescue. It is also designed for low-altitude missions and has already proven its abilities to support humanitarian and search and rescue missions. The P-8A variant is flown by the U.S. Navy, the United Kingdom’s Royal Air Force, Royal Australian Air Force, Royal Norwegian Air Force and Royal New Zealand Air Force.

Due to such remarkable features, Boeing enjoys strong demand for the P-8 aircraft, with the latest contract win being another bright example of the same. This jet’s demand can be further gauged from the fact that as of February 2024, there were 200 P-8 jets in service or on contract across nine countries of the world.

Growth Prospects for BA Stock

The growing demand for combat jets, including patrol aircraft, is primarily driven by escalating geopolitical tensions and evolving security threats worldwide. Technological advancements in such jets, such as sophisticated sensors, communication systems, and multi-domain operational capabilities, which enhance mission effectiveness, have also significantly contributed to this growing demand trend. Moreover, increasing defense budgets by developing nations in response to growing threats have been fueling the acquisition of these high-tech jets. 

With the extremity and complexity of global security challenges increasing each day, the demand for technologically advanced defense jets is expected to remain robust.

This must have prompted Mordor Intelligence to project that the global military aviation market will witness a CAGR of 5.2% during the 2024-2030 period. Such projections indicate immense opportunities for Boeing to reap the benefits of the market’s expansion, with its portfolio containing renowned combat-proven jets like the F/A-18 Super Hornet, F-15, E/A-18G and C-17 Globemaster III aircraft, in addition to P-8 jets.

Opportunities for BA’s Peers

Other prominent defense majors that are involved in the manufacturing of military aircraft and thus expected to reap the benefits of the growing military aviation market are discussed below:

Northrop Grumman NOC: Since its inception, the company has been a pioneer in the development of military aircraft. The company has built some of the world’s most advanced aircraft, ranging from the innovative B-2 Spirit stealth bomber to the game-changing E-2D Advanced Hawkeye. NOC’s Aeronautics Systems unit is engaged in the design, development, production, integration, sustainment and modernization of advanced aircraft systems. 

The consensus estimate for NOC’s long-term (three-to-five years) earnings growth rate is 19.1%. The consensus mark for NOC’s 2024 sales indicates an improvement of 5.3% from the 2023 reported figure. 

Airbus Group EADSY: The company’s 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.

The Zacks Consensus Estimate for EADSY’s long-term earnings growth rate is 10.5%. The consensus estimate for 2024 sales implies an improvement of 5.1% from the 2023 reported figure. 

Textron TXT: Its military aircraft includes the Beechcraft T-6 training aircraft and the Beechcraft AT-6 light-attack aircraft. The company also manufactures the Beechcraft Model 18 light bomber, the T-44 and T-34 training aircraft and the T-1A jet trainer.

The consensus estimate for TXT’s long-term earnings growth rate is 10.1%. The consensus mark for 2024 sales indicates an improvement of 1.2% from the 2023 reported figure.

Price Movement

Shares of Boeing have plunged 30.2% in the past year compared with the industry’s 1% decline.

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Zacks Rank

Boeing currently carries a Zacks Rank #5 (Strong Sell). 

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The Boeing Company (BA): Free Stock Analysis Report
 
Northrop Grumman Corporation (NOC): Free Stock Analysis Report
 
Textron Inc. (TXT): Free Stock Analysis Report
 
Airbus Group (EADSY): Free Stock Analysis Report

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