Boeing Foresees $2.5T Defense Market Opportunities til 2028

Zacks Equity Research

The Boeing Company BA recently revealed its market outlook (BMO) that forecasted $2.5 trillion of defense and space opportunities through 2028. The current forecast has been made keeping in mind the U.S. government’s ongoing efforts in modernizing various military platforms and systems, inventing and adapting to military platforms and systems, and accelerating new exploration opportunities within the defense space.

Recent Budget Proposal to Aid Defense Market

In March 2019, the U.S. government proposed its fiscal 2020 defense budget, under which the Department of Defense would receive $718 billion, reflecting a 4.9% increase from the prior year. Boeing itself could be a significant beneficiary, as the proposed budget includes a spending plan of $57.7 billion on military aircraft, reflecting a 166% surge from the approved fiscal 2019 defense spending.

If approved, this increased spending provision will surely boost the aerospace and defense market across the United States, as it would usher in more contracts for the nation’s major defense companies.

Expected Rise in Foreign Military Sales

Increasing geo-political tensions across the globe have prompted nations to strengthen their defense systems manifold. Evidently, in the recent past, there has been a rise in demand for missile defense systems, fighter jets, autonomous systems, satellites, spacecraft and other critical defense products. Such steady rise in the global demand will lead to an increase in the foreign military sales of U.S.-based defense companies alongside improving inter-personal relationship among nations.

Mergers and Acquisitions to Boost Industry

In recent times, rising focus on cost-reduction initiatives, widespread competition and increased control over production procedures have prompted defense industry giants to engage in mergers and acquisitions. Moreover, the current U.S. administration has been increasing the defense budget over the past couple of years, which has enticed defense companies to strengthen product portfolio through mergers and acquisitions.

Raytheon Company’s RTN latest all-stock merger deal with multinational conglomerate United Technologies Corp. UTX is expected to create an entity worth $121 billion. Also, Harris Corporation and L3 Technologies LLL are expected to combine in Merger of Equals, which will be one of the biggest defense mergers in recent years. Such consolidations by leading industry players should improve economies of scale for the aerospace-defense industry as a whole.

Price Movement

In a year’s time, shares of this Zacks Rank #3 (Hold) company have gained 9.3% compared with the industry’s 6.2% growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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