The Boeing Company ( BA – Free Report) recently secured a contract to deliver 47 787-Dreamliner aircraft to American Airlines, the world's largest airline. According to the terms, the airline will receive 22 787-8 and 25 787-9 Boeing Dreamliners to expand and modernize its fleet.
This agreement is expected to open new routes for American Airlines worldwide, including Europe and Asia Pacific region. The agreement is valued at more than $ 12 billion at current list prices and will make Boeing the largest 787-Dreamliner consumer in the Western Hemisphere.
A brief note on Boeing 787
Boeing & # 39; s 787 is the best-selling double aisle jet fleet to date. The aircraft is built with lightweight composite materials and powered by advanced engines, which is 20% more fuel efficient than the Boeing 767. The models of the 787 fleet involved in this agreement are the 787-8 Dreamliner, equipped to carry 242 pbadengers up to 7,355 nautical miles, as well as 787-9, which can fly 290 pbadengers up to 7,635 nautical miles.
The 787 Dreamliner fleet contains Smooth Ride technology, which allows you to detect turbulence and automatically adjust wing control surfaces for a smoother ride. These sensors are found throughout the aircraft.
Boeing and American Airlines
With this agreement, Boeing has strengthened its relationship with American Airlines, its largest customer for more than 80 years. It currently delivers the 737 Max, Next Generation 737, 777 and 787 jets to the Seattle-based airline. The Boeing Global Services division provides American Airlines with efficient tools such as Airplane Health Management and Toolbox, which improve the operational performance and reliability of the shipment.
What's in it for Boeing?
Boeing's most recent market perspective, The world will need 41,030 new aircraft, worth $ 6.1 billion, between 2017 and 2036. The company expects wide-body aircraft to be a strong engine, which comprises 20% of the total projection. This translates into a global demand of 8,210 wide-body aircraft, valued at $ 2.5 billion, over the next 20 years.
Notably, with the 787 fleet leading the space of wide-body aircraft, Boeing has achieved more than 1350 orders to date. We can expect the company to win more similar orders in the coming quarters. This in turn will increase the momentum of the Boeing Commercial Aircraft unit, which recorded revenues of $ 56.7 billion in 2017, improving 8% year-on-year. Meanwhile, the production rate of 787-Dreamliners began at 12 per month in 2016 and plans to increase the rate to 14 per month by the end of the decade. We believe that the latest agreement will allow the company to successfully reach its accelerated target production rate.
Price performance
Boeing shares have recovered around 83.7% in one year, compared with the broader industry gain of 44.7%. The superior performance was mainly driven by strong global demand for commercial aircraft and military jets.
Zacks Rank and other key selections
Boeing carries a Zacks rank # 2 (Buy).
Some other best-ranked stocks in the same sector are Huntington Ingalls ( HII – Free report), Curtiss-Wright Corporation ( CW – Free report) and Northrop Grumman Corporation ( NOC – Free report). While Huntington Ingalls has a range of Zacks n. ° 1 (strong buy), Curtiss-Wright and Northrop Grumman have a range of Zacks n. ° 2. You can see the complete list of current actions of Zacks # 1 here.
Huntington Ingalls recorded an average surprise of positive gains of 3.85% in the last four quarters. The Zacks consensus estimate for the 2018 earnings increased by $ 4.94 to $ 17.38 in the last 90 days.
Curtiss-Wright Corporation recorded an average surprise of positive gains of 15.06% in the last four quarters. The Zacks consensus estimate for 2018 earnings improved by 60 cents to $ 5.79 in the last 90 days.
Northrop Grumman Corporation recorded an average surprise of positive gains of 16.17% in the last four quarters. The Zacks consensus estimate for 2018 grew $ 1.73 to $ 15.25 in the last 90 days.
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