Air Force Awards Boeing Contract

The Boeing Company (BA - Analyst Report) received a $1.09 billion contract modification from the U.S. Air Force. The contract modification is for the existing Block II follow-on contract for full production, launch and on-orbit activation of the seventh Wideband Global SATCOM (“WGS”) satellite and procurement of long-lead materials for an eighth satellite.

The authorization also includes options for the full production, launch and on-orbit activation of satellites eight and nine. The contract modification is part of the WGS Block II follow-on contract awarded in August 2010.

The contract includes production, launch site activities, and initial orbital operations and checkout for each satellite. Boeing also is working with the Air Force on potential upgrades that would further increase the satellites' capacity and operational flexibility.

WGS is the Department of Defense's highest-capacity communications satellite system.

WGS satellites are built on Boeing 702HP platform, which uses a highly efficient xenon-ion propulsion capability. The communications payload has flexibility features that are important to the military, such as the ability to interconnect terminals that operate in different frequency bands and to reposition coverage beams based on evolving mission needs.

WGS supports missions ranging from tactical communications between ground forces, to relaying data and imagery from airborne intelligence, surveillance and reconnaissance platforms.

Boeing has a unique position as the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries. Besides, it is one of the largest aerospace and defense contractors in the world. Also its revenues are spread across more than 90 countries around the globe.

Earlier, strong performance from the commercial airplanes business and stable core operations allowed Boeing to register a solid second quarter 2011. The company surpassed both the year-ago results and the Zacks Consensus Estimates. Boeing has raised its earnings per share guidance range for fiscal 2011 to $3.90 – $4.10 from the earlier band of $3.80 – $4.00, encouraged by a solid second quarter 2011.

However, Boeing lowered its commercial airplane delivery guidance for 2011 to a range of 485 – 495, from 485 – 500 forecasted earlier. The reduction was due to lower planned deliveries in the second half of 2011 on development programs (especially 787 and 747-8 units).

The Zacks Consensus Estimates for third quarter 2011, fiscal year 2011 and fiscal year 2012 currently stand at $1.07 per share, $4.25 per share and $5.30 per share, respectively.

Boeing currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock. This is in sync with other aerospace and defense behemoths like General Dynamics Corporation (GD - Analyst Report) and Lockheed Martin Corporation (LMT - Analyst Report).


Source: By Zacks Equity Research - September 14, 2011 - www.zacks.com

Photo: Boeing 787

(16.09.2011)