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September 29, 2010
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The Boeing Company (BA) has been awarded a $5.3 billion, multi-year procurement (MYP) contract for 124 fighter aircrafts from the U.S. Navy. Under the terms of the agreement, Boeing will deliver 66 F/A-18E/F Super Hornet and 58 EA-18G Growlers to the Navy from 2012 through 2015.
The new contract is the third multi-year agreement between Boeing and the Navy for production of the F/A-18E/F, the Navy's frontline strike fighter, which delivers forward-deployed air combat capability around the world from the decks of 11 U.S. Navy aircraft carriers.
The EA-18G, the United States' newest combat aircraft, conducts advanced airborne electronic attack (AEA) missions to support Navy and joint force requirements. The EA-18G is scheduled for its first combat deployment in the final phase of 2010.
Earlier, Boeing delivered 210 Super Hornets to the Navy during the initial F/A-18E/F MYP, between 2000 and 2004. Boeing was then awarded a second MYP that included aircraft procurement betweens 2005 and 2009. Aircraft deliveries under that contract continue through 2011 and totaled 257 aircraft.
Boeing has a unique position as the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries, and one of the largest aerospace and defense contractors in the world. Also its revenues are spread across more than 90 countries around the globe.
Over the past month, Boeing shares were up 2.14%, but underperformed the S&P 500 Index, which was up 7.80% over the same period. The level of underperformance has widened as the month progressed mainly owing to near-term headwinds over 787 delays along with expected cutbacks over the U.S. defense budget. Still the company is trading at a wide premium in terms of forward earnings estimates compared to its large cap defense prime peers like Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC). So we see limited scope for additional outperformance by Boeing in the near term and retain a Zacks #3 Rank (short-term Hold rating) on the stock.
In the short run we, however, favor the Zacks #1 Rank (short-term Strong Buy rating) EMBRAER - Empresa Brasileira de Aeron (ERJ) owing to the strong support of the Brazilian government, diversification into broader defense and corporate jets, apart from a strong liquidity profile.
Read the full analyst report on "BA"
Read the full analyst report on "LMT"
Read the full analyst report on "NOC"
Read the full analyst report on "ERJ"
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