BA Wins $20B U.S. Navy Contract Following Stock Price Plunge

Sam (0:01)

We are back on Morning Trade Live and focusing on the one-year chart for Boeing. It's been a bit of a bumpy ride. We are higher today off the back of this latest news around a deal, although we are coming off the session highs right now. It could have something to do with the fact that oil is picking up a bit, but we are very much focused on the news of the day because the company has secured a new military contract. So let's talk about this with Marley Kayden. Marley, good morning to you. Just walk us through the details of what we've learned here.

Marley Kayden (0:30)

Good morning, Sam. Yes, we are seeing Boeing move higher. As you mentioned, giving back a little bit of its gains, but still higher on the session after the Navy chose it to build its next generation fighter jet. This is the latest run of contract wins for Boeing's military unit. So just getting a better and better outlook here as far as that unit is concerned. This particular deal is worth about $20 billion, a little more than $20 billion, and it has Boeing building the next generation jets that will eventually replace the carrier Super Hornet. The target year is about 2030, somewhere in the 2030s is when they're looking to have this next gen fighter jet ready to go.

Important to note here that Boeing beat Northrop Grumman in this race to be the one selected to build this next gen jet here, and the only other rival was Lockheed Martin, but they dropped out of the running of the competition last year.

The jet, the Navy says, will deliver a decisive combat advantage for the warfighter. That's from the Undersecretary of Defense for Acquisition and Sustainment. And the deal makes Boeing the sole provider of this sixth generation tactical fighter for both the Navy and for the Air Force. This particular aircraft will likely include more stealth features than the fifth generation predecessor. It will have sensors that use artificial intelligence. It will be armed with lasers and hypersonic weapons. This is all according to the Congressional Research Service. And they will also likely have more advanced engines and operate alongside drones. So we are seeing with this next gen a huge pivot to what modern warfare looks like now and potentially what it might look like half a decade from now, which is when these are expected to be delivered. Lockheed Martin, as we know, makes the F-35 stealth fighter. That is flown by the Air Force, the Navy and the Marine Corps currently. And they are the only maker of that fifth gen jet fighter for the US military. So this is an entire contract move away from Lockheed Martin. Boeing last year won another contract to build the next fleet of Air Force jet fighters. They're calling that right now the F-47.

That deal was announced by the president and Pete Hegseth, our defense secretary and then the Air Force chief of staff last year. But this decision could stretch the company's already busy production lines. We've had some issues with delivery times here for Boeing. So certainly something that we should keep an eye on here. Certainly something investors will be keeping an eye on. Boeing has also struggled a bit with building the drones that could refuel other aircrafts. That has been another focus here. That drone was supposed to fly for the first time in 2021 It didn't have its first flight until April of this year. It's not expected to begin operations until 2029 That's about four and a half years behind the plan, Sam. So they will likely have that in the air and operational in time to deal with this new sixth generation fighter jet. But just an example of some of the issues they've had with their timelines and their deliveries for Boeing. But a very exciting day for Boeing with this additional 20 billion plus dollar contract, of course, beating out Northrop Grumman for this contract. And as I'm just going to pull up Northrop Grumman's movement this morning, they're down about 4% on the loss of this deal.

Sam (3:47)

Yeah, I mean, that stock performance really tells a story there. And you know, obviously coming off the back of that software glitch for Boeing had been reported just a couple of days ago as well. So a lot going on, some positive gains here for the company. Thanks so much, Marley, for the details of that particular story. Let's trade the name now with Scott Bauer, CEO of Prosper Trading Academy. Good morning, Scott. How would you approach an example trade on this one?

Scott Bauer (4:09)

You know, obviously, we've had good news, we've had some not so good news here about Boeing, but from a technical standpoint, this area right here around 187 or so, there is some really nice support in that area. So what I'm doing is I'm going out a couple of weeks, and I'm just going to sell a simple put spread here. I'm selling the 187 and a half, 180 put spread. Those expire on October 16th. I'm looking to collect about $3 for that. So the break even on that on Friday, October 16th would be 184 and a half. I think that's just a nice opportunity to look at what's going on and say, hey, maybe we're not going to get a big rally off of the drop that we've seen, but the stock is stabilizing.