Boeing (BA) Secures $85M Deal to Aid MQ-25A UAV Program

Zacks Equity Research

The Boeing Company BA recently won a modification contract to procure three MQ-25 aerial refueling drone's System Demonstration Test Articles. The majority of the work related to the deal will be carried out in St. Louis, MO.

Valued at $84.7 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, MD. The entire task is scheduled to be completed by August 2024.

Importance of MQ-25A

Boeing’s MQ-25A, an unmanned aerial vehicle (UAV), is designed to provide the U.S. Navy with much-needed refueling capability, allowing for better use of fighter jets. The UAV thereby extends the combat range of deployed F/A-18 Super Hornet and EA-18G Growler jets of Boeing, and Lockheed Martin’s LMT F-35C fighters.

Our View

With increasing acts of terrorism across the globe, the demand for UAVs has risen. With UAVs one can sneak up on activities of enemies without their knowledge. Also, physical infrastructure limitations sometimes prohibit the use of manned rotary or fixed-winged aircraft.

Notably, increasing use of UAVs in various military applications, such as intelligence, surveillance, and reconnaissance (ISR) and electronic warfare has been boosting the military segment of the global UAV market. Interestingly aerial refueling has been one of the primary growth contributors to this space.

In this context, it is imperative to mention that aerospace major Boeing bears more than 10 years of experience in unmanned aircraft systems (UAS) flight services and information delivery. Notably, its MQ-25 is the U.S. Navy’s first operational carrier-based unmanned aircraft.

Looking ahead, the global UAV market is projected to increase from $19.3 billion in 2019 to $45.8 billion by 2025, at a CAGR of 15.5%, driven by increasing use of unmanned aerial vehicles in commercial and military applications.

With North America leading the global UAV market and Boeing being a prominent defense contractor in the nation, it is obvious that when it comes to UAVs, we may expect the aircraft giant to win more UAV orders like the latest one.

Price Movement

In a year’s time, Boeing’s shares have plunged 66.7% compared with the industry’s decline of 33.5%.

Zacks Rank & Key Picks

Boeing currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the same space are Leidos Holdings, Inc. LDOS and Huntington Ingalls Industries, Inc.HII. While Leidos Holdings sports a Zacks Rank #1 (Strong Buy), Huntington Ingalls carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Leidos Holdings delivered average positive earnings surprise of 11.19% in the trailing four quarters. The company has a long-term earnings growth estimate of 9.9%.

Huntington Ingalls Industries came up with positive earnings surprise of 2.83% in the last reported quarter. The Zacks Consensus Estimate for the company’s 2020 earnings indicates an annual improvement of 45.2%.

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