The Boeing Company BA wins a modification contract to provide engineering sustainment services for KC-135. Valued at $14.5 million, the contract is projected to be completed by Mar 31, 2023. The work involved in the deal will be carried out at multiple locations, namely Oklahoma City, OK; San Antonio, TX; Huntsville, AL; and Fort Walton Beach, FL.
Significance of KC-135
The KC-135 Stratotanker is an aerial refueling aircraft that provides core aerial refueling capability for the U.S. Air Force and has excelled in this role for more than 60 years. It also provides aerial refueling support for the Air Force, Navy, Marine Corps and allied nation aircraft. The KC-135 is also capable of transporting litter and ambulatory patients using patient support pallets during aeromedical evacuations.
Of the original KC-135A, more than 417 were modified by the new CFM-56 engines produced by CFM-International. The re-engine tanker, designated as either the KC-135R or KC-135T, can offload 50% more fuel and is 25% more fuel-efficient. Moreover, it costs 25% less to operate and is 96% quieter than the KC-135A.
The upgraded and modernized features of the KC-135 entail improved services and greater reliability, which may lead to the increased demand for the aircraft. The latest contract win is a bright example of that.
The overseas deployment, coupled with unmanned and manned aerial systems, is propelling the demand for the air-to-air refueling market. The demand is likely to be further fueled by the increased defense spending worldwide to strengthen defense capabilities.
In this context, per the report from the Markets and Markets firm, the air-to-air refueling market size is projected to expand at a CAGR of 11.2% during the 2020-2025 period. Such an expanding size of the air-to-air refueling market represents the immense scope for Boeing to capitalize on the opportunity as its family of KC-135 enjoys strong demand in the air-to-air refueling market. Apart from BA, companies that can reap the benefits of the growing market are
Airbus EADSY: Its A330 MRTT can carry up to 111 tons of fuel in the aerial refueling mission and features the center-line Aerial Refueling Boom System, which is fly-by-wire controlled and delivers a fast fuel flow rate. The aircraft can also be equipped with pods under each wing for hose and drogue refueling and an under-fuselage hose and drogue unit.
Airbus boasts a long-term earnings growth rate of 12.4%. The Zacks Consensus Estimate for EADSY’s 2022 sales indicates a growth rate of 3% from the prior-year reported figure.
Lockheed Martin LMT: Its LMXT represents the most advanced strategic tanker available to the U.S. Air Force as well as the newest tanker produced by Lockheed Martin. LMXT is capable of accomplishing the full range of missions demanded from air refueling aircraft.
Lockheed Martin’s long-term earnings growth rate stands at 5.7%. LMT shares have returned 13.6% in the past year.
Embraer ERJ: Its C-390 Millenium is the new-generation military multi-mission airlift aircraft that is capable of transporting and launching cargo and troops and performing a wide array of missions, including medical evacuation, search and rescue, humanitarian search and rescue, aerial refueling (fighters and helicopters), aerial firefighting and humanitarian assistance.
Embraer’s long-term earnings growth rate is pegged at 17%. The Zacks Consensus Estimate for ERJ’s 2022 earnings suggests a growth rate of 73.3% from the prior-year reported figure.
In the past month, shares of Boeing have inched up 0.4% against the industry’s decline of 1.5%.
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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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