Aerospace and defense operator The Boeing Company (BA) received a couple of contracts worth $661 million from the Department of Defense (DoD). Together these contracts comprised nearly 68% of the total orders awarded by the DoD on Dec 26.
The largest among the two contracts was a $617.7 million order for remanufacturing 22 CH-47F Chinook helicopters, and build 6 more, for the U.S. Army. This contract also includes a long lead fund to acquire parts needed to remanufacture 13 more Chinooks. These helicopters are expected to be delivered by Dec 31, 2020.
Chinook helicopters were first introduced by the Army during the Vietnam War and subsequently more efficient and advanced versions were launched. The latest version of Chinooks has features like reduced vibration effects, an integrated cockpit control system and more powerful engines with digital fuel controls.
Boeing’s Chinook has been an old war horse and has served the Army well over the years. Featuring the latest technologies, the Chinook gives the Army an edge in combat situations.
As per the second contact, worth $43.2 million, the company will impart engineering and technical field services training for U.S. Navy and Marine Corps military and civilian personnel, and also Kuwaiti military personnel. This contract will last until the end of 2018.
All the large U.S. defense operators are keen on winning foreign contracts to make up for domestic defense budget cuts. Japan could be the next big destination for these defense primes. Japan recently announced a defense budget of $45.8 billion for the next fiscal, up 2.2% year over year.
Defense spending in Japan could rise further driven by spiraling tensions between Tokyo and Beijing. The big U.S. players including Boeing could definitely look at Japan to earn more defense orders.
Boeing currently has a Zacks Rank #2 (Buy). Other players in the aerospace/defense sector, which look attractive at current levels, include Lockheed Martin Corporation (LMT),General Dynamics (GD) and Northrop Grumman Corporation (NOC). All these stocks carry the same rank as Boeing.