The Boeing Company BA recently secured a contract to remanufacture eight and procure nine new-build Apache AH-64E aircraft. Work related to the deal is scheduled to be completed by Feb 28, 2023.

Valued at $242.1 million the contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, Alabama. Boeing will carry out the task in Mesa, AZ.

Rotorcrafts & AH-64

In recent times, military rotorcrafts are being used as part of the comprehensive mission parameters owing to the integration of multiple advanced capabilities instilled in them. Such specialized rotorcrafts significantly help in improving the performance of U.S. military operations on a global scale by providing enhanced attack, observation and anti-submarine warfare helicopters.

Boeing’s AH-64 Apache is the world’s most advanced multi-role combat helicopter. It is used by the U.S. Army and a growing number of international defense forces. Notably, AH-64E is the latest version of the AH-64 gunship and is equipped with new sensors, avionics and improved night operation capabilities. Also, it has infra-red suppressing exhaust system as well as chaff and flare dispensers, which jointly reduce the chances of being hit by enemy air defense missiles.

Rationale Behind the Deal

Over the last couple of years, the U.S. Aerospace and Defense space has been witnessing a solid growth, courtesy of President Trump decision to discard his predecessor’s budget sequestration policy. This, in turn, ushered in a golden era for prominent defense contractors like Boeing, which have been witnessing a decent uptick in order growth for their valued military weapons, ever since.

Additionally, America’s rocky cross border relationship with North Korea induced both the nations to frequently conduct counter missile testing operations for most part of 2017. Also, the United States’ hostile stance toward Russia as well as its consistent trade wars with China has remained some of the prime highlights pertaining to defense stocks.

In the wake of such developments, the United States has significantly enhanced its surveillance, and the combat proven rotorcrafts play a crucial role in it. In this regard, Boeing’s contribution toward strengthening the nation’s aerospace surveillance system is worth mentioning. Notably the company’s defense unit manufactures military rotorcrafts and other rotary-wing programs besides offering a wide variety of related technical expertise, system upgrades and maintenance services.

We believe these offerings are pivotal for effective usage of the rotorcrafts on a frequent basis.

Looking Ahead

As per a report by Research and Markets firm, global military rotorcraft market is expected to witness a CAGR of 4.28% to $30.7 billion by 2028. Such growth can be attributed to the need for replacing aging fleets and enhancement of capabilities pertaining to disaster relief operations. Also, increasing geopolitical tensions across the world have prompted developing nations to effectively increase their defense budget. As a result, the profit margin of prominent helicopter-makers like Boeing, Lockheed Martin LMT and Textron TXT are anticipated to expand in coming days. 

Price Movement

In a year’s time, Boeing has gained 49.6% compared with the industry’s 23% growth. The outperformance was primarily led by robust demand for its commercial aircraft and military jets worldwide.

Zacks Rank & Stock to Consider

Boeing currently carries a ZacksRank #3 (Hold). A better-ranked stock in the same space is Huntington Ingalls Industries HII carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Huntington Ingalls pulled off an average positive earnings surprise of 9.48% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 6.4% north to $17.24 in the past 90 days.

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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
 
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Textron Inc. (TXT) : Free Stock Analysis Report
 
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