Aerospace and defense giant, The Boeing Company (BA) received a fixed price contract from the U.S. Air Force valued at approximately $3.5 billion. Boeing will design, develop, manufacture and deliver 18 combat-ready tankers by 2017.
Over the long run the contract to build the next-generation aerial refueling tanker aircraft could be worth more than $30 billion that will replace 179 of the existing 400 KC-135 tankers of the U.S. Air Force.
Boeing’s tanker termed KC-46A is based on the Boeing 767 series commercial airplane. The KC-46A Tanker is a widebody, multi-mission aircraft updated with the latest and most advanced technology and capable of meeting the Air Force’s needs for transport of fuel, cargo, passengers and patients. The Tanker also features an expanded refueling envelope, increased fuel offload rate and fly-by-wire control system.
The KC-46A tanker also will fuel the U.S. economy as it supports approximately 50,000 U.S. jobs with Boeing and more than 800 suppliers spread across in more than 40 states.
The contract will boost the fortunes of Boeing whose performance would be hampered by roadblocks like the U.S. government’s aim to save at least $100 billion from the defense budget by 2016. Order backlog from the defense business also was affected in 2010 due to lower funding for existing multi-year contracts like the Brigade Combat Team Modernization (BCTM) and Chinook.
Boeing’s fourth quarter 2010 earnings of $1.11 per share missed the Zacks Consensus Estimate by 2 cents. The company expects 2011 operating earnings per share to be in the range of $3.80–$4.00. The Zacks Consensus Estimate, for 2011, currently pegged at $4.12 per share, is higher than the company’s guidance.
Boeing is banking on its commercial airplanes business to arrest the tide. Per the company globally airlines are forecast to earn $15 billion in 2010 following a $10 billion net loss in 2009. This should allow airlines to focus on fleet expansion which remained suspended following fuel price spikes and recession in 2008-2009.
To catch up with the expected rise in air traffic and to check fuel bills, airliners will need to replace older airplanes with new ones. Based on long-term global economic growth projections, and factoring in increased utilization of the worldwide airplane fleet and requirements to replace older airplanes, Boeing expects a $3.6 trillion market for 30,900 new airplanes over the next 20 years.
Headquartered in Chicago, Boeing is a premier jet aircraft manufacturer and one of the largest defense contractors in the U.S. The company’s customers include domestic and foreign airlines, the U.S. Department of Defense, the Department of Homeland Security, the National Aeronautics and Space Administration, other aerospace prime contractors and certain U.S. government and commercial communications customers.
Boeing is the largest aircraft manufacturer in the world in terms of revenue, orders and deliveries, and the second largest aerospace and defense contractor. Also its revenue exposure is spread across more than 90 countries around the globe.
Demand for Boeing’s Commercial Airplanes, due to the continuing recovery of the global economy, is emanating from a steady improvement in passenger and freight traffic.
Boeing currently retains a Zacks #4 Rank, which translates into a short-term Sell rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock. This is in sync with other aerospace and defense behemoths likeGeneral Dynamics Corporation (GD), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC).
BOEING CO (BA): Free Stock Analysis Report
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LOCKHEED MARTIN (LMT): Free Stock Analysis Report
NORTHROP GRUMMN (NOC): Free Stock Analysis Report
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