Boeing Wins $411M FMS Deal to Supply 38 Apache Helicopters

Aerospace giant, The Boeing Company BA has secured a modification to a foreign military sales FMS contract worth $410.9 million from the U.S. Army Contracting Command, Redstone Arsenal, AL. Work in connection to this deal will be carried out in Mesa, AZ.

Per the terms of the original contract, Boeing will provide 38 Apache aircraft, three Longbow crew trainers and associated spares to the U.K. government.

The contract will utilize fiscal 2010 other funds to execute the work, scheduled to be completed by Feb 28, 2023.

A Brief Note on Apache

The Apache is a twin-engined army attack helicopter developed by Boeing, which was first used in combat in 1989 by the U.S. Army in Panama. Apart from its proven role in combat, this family of helicopters has also supported low-intensity and peacekeeping operations worldwide, including Turkey, Bosnia and Kosovo.

The Apache Longbow — an advanced variant of the Apache model — was first delivered in 1997. The AH-64 family of choppers is the most well known Apache Longbow variant. It is equipped with the Longbow millimeter wave fire control radar and the Longbow Hellfire missile. The AH-64E — the latest version of the AH-64 gunship — comes with new sensors, avionics and improved night operation capabilities.

Our View

Being one of the largest aerospace and defense contractors, Boeing's defense business stands out among peers based on its broadly diversified programs, strong order bookings and backlog. During the first quarter of 2017, the company's defense and space business booked orders worth $12 billion, including a $3.4 billion contract from the U.S. Army for 268 AH-64 Apache helicopters. Other notable orders booked in the quarter included a $2.2 billion deal for 17 P-8 Poseidon aircraft and a $2.1 billion order for 15 additional KC-46 Tanker aircraft from the U.S. Air Force.

Apart from its domestic market, Boeing has been witnessing strong overseas demand for its aircraft as well. Of late, the company has successfully cleared congressional notification regarding the FMS of 48 Chinooks to Saudi Arabia and 37 Apaches to the UAE. Moreover, the government of Norway has signed a FMS contract with the U.S. government for five P-8 Poseidon aircraft. The Government of Canada has also released a letter of request for the sale of 18 F-18 Super Hornets.

These facts clearly underline the strong forte that Boeing boasts in combat-proven aircraft, among other defense equipment.

Designed in 1972 to meet the U.S. Army's need for an AAH (Advanced Attack Helicopter), Boeing's AH-64A has taken supremacy over the world's premier attack helicopter from Textron Inc.'s TXT Bell AH-1 Cobra. We believe that consistent contract inflows like the recent one will enable the Apache model to maintain its supremacy in days ahead.

Price Performance

Shares of Boeing have rallied 46.2% over the last 12 months, outperforming the Zacks categorized Aerospace–Defense industry's gain of 26%. This could be because the company's strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions. In addition, the company poses strong competition to its peers like Lockheed Martin Corp. LMT and General Dynamics Corp. GD.

Zacks Rank

Boeing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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