The Boeing Company BA recently secured an order worth $2.38 billion from the U.S. Air Force to manufacture 15 additional KC-46A Pegasus aerial refueling tankers. This contract win should significantly boost the aerospace giant’s Boeing Defense, Space and Security (“BDS”) business segment.

Significance of Boeing’s KC-46A Pegasus
 

The KC-46 Pegasus is a wide-body, multirole tanker that can refuel all U.S. allied and coalition military aircraft compatible with international aerial refueling procedures. The tanker is also equipped with data links and Advanced Battle Management System (ABMS) integration. It connects multi-domain warfighters, providing tactical situational awareness and real-time information superiority. Such remarkable features must have bolstered the demand for this tanker jet, translating into solid order growth. The latest contract win is a bright example of this.

The KC-46A continues to exhibit its exceptional capabilities, having flown more than 100,000 hours and delivered more than 200 million pounds of fuel to recipients worldwide. The solid demand this aircraft enjoys in the military aviation market can be gauged from the fact that since 2019, Boeing has delivered 89 KC-46As to the U.S. Air Force and four to the Japan Air Self-Defense Force.

Boeing’s Growth Prospects
 

Factors like increasing defense spending by developed nations and rapidly rising geopolitical tensions worldwide, such as the ongoing hostility in the Middle East, have been forcing nations to prioritize long-range combat operations. Tanker aircraft play a crucial role in such operations, allowing fighter jets, bombers and surveillance aircraft to conduct operations without the limitation of fuel range. Increasing long-range operations, rising military expenses by developing nations and the advent of new technologies in air-to-air refueling systems have been bolstering the growth prospects for the tanker aircraft market.

This is likely to have led the Mordor Intelligence firm to predict that the tanker aircraft market will witness a CAGR of 6.4% during the 2024-2029 period. Such projections indicate significant growth opportunities for leading tanker jet manufacturers like Boeing.

Apart from KC-46A Pegasus, Boeing’s 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.  Over the years, this aircraft has been altered to perform a variety of operations, ranging from flying command post missions to reconnaissance.

Opportunities for BA’s Peers
 

Other prominent aerospace players that have a strong presence in the tanker aircraft market are mentioned below:

Airbus Group EADSY: The company's A330 MRTT is an ideal replacement for aging strategic tankers, offering enhanced range, payload and fuel offload capabilities for unparalleled mission flexibility and versatility. It can deliver 50 tons of fuel to a variety of receivers during a four-hour flight over 1,000 nautical miles from takeoff.

Airbus has a long-term (three to five years) earnings growth rate of 10.5%. The Zacks Consensus Estimate for EADSY’s 2024 sales calls for an improvement of 6.2% from the prior-year reported figure.

Lockheed Martin Corp. LMT: The company’s KC-130J is a versatile military tanker aircraft. It provides aerial refueling support with a maximum fuel capacity of 61,364 pounds. Its enhanced fuel capacity, reliability and modern avionics make it essential for extended-range operations.

Lockheed boasts a long-term earnings growth rate of 4.5%. The Zacks Consensus Estimate for LMT’s 2024 sales suggests an improvement of 5.4% from the prior-year reported figure.

Embraer S.A. ERJ: The company’s KC-390 Millennium is a tactical multi-mission tanker aircraft. It can support a range of missions and provides significantly reduced crew workload, efficiency and precision for mission accomplishments.

Embraer delivered an average earnings surprise of 127.28% in the last four quarters. The Zacks Consensus Estimate for ERJ’s 2024 sales suggests an improvement of 18.6% from the prior-year reported figure.

BA Stock Price Movement
 

In the past three months, shares of Boeing have dropped 18% compared with the industry’s decline of 8.8%.

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Zacks Rank
 

Boeing currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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