The Boeing Company (BA) has received a contract worth $11.9 billion from the U.S. Air Force to upgrade the B-52 bombers. The contract extends for eight years. Wright-Patterson Air Force Base in Ohio will deal with the contract execution.
 
The company’s Defense, Space & Security segment had suffered a setback in revenues in the second quarter of 2010. Revenues declined 8% year over year. We expect similar contract awards from the Defense Department to help the segment recoup from weakness and deliver solid performance going forward. In September alone, Boeing received contracts worth $17.96 billion from the Department of Defense.
 
A major portion of Boeing’s revenues depends on the U.S. budget with approximately 50% of the revenues coming from defense contracts. Any cut in defense spending will adversely impact Boeing’s revenues.
 
In a separate development, Boeing delivered its eleventh 737-800 airplane to Air Algerie, the state-owned flagship carrier of Algeria. Boeing is also scheduled to deliver two additional 737-800s in 2010 and four in 2011 to the Algerian airline.
 
The Boeing Company is among the best positioned in its sector given its balanced exposure to commercial aircraft and defense equipment. With economic recovery gaining traction, we expect freight and passenger traffic also to improve, leading to renewed demand in the commercial aerospace market. The company seems well poised to capitalize on the recovery as it continues to win orders for commercial airplanes as well.
 
We maintain our “Neutral” recommendation on Boeing. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
 
Headquartered in Chicago, The Boeing Company designs and produces commercial airplanes (787, 737, 747, 767, 777), defense systems and civil and defense space systems. It is also the largest contractor for NASA (National Aeronautics and Space Administration). It competes with major defense primes like Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC).
 
 
BOEING CO (BA): Free Stock Analysis Report
 
LOCKHEED MARTIN (LMT): Free Stock Analysis Report
 
NORTHROP GRUMMN (NOC): Free Stock Analysis Report
 
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