Stay Tuned: Boeing vs. Northrop
By
Rich Smith
February 29, 2008
|
Whether you knew it or not, today is the day you've been waiting for. At least, it is if you own shares of either Boeing (NYSE: BA) or Northrop Grumman (NYSE: NOC) -- the two key contenders in the contest to win a potential $40 billion contract to build the "KC-X Tanker" for the U.S. Air Force. Citing an Air Force source, Reuters has just confirmed that the award will be announced at 5 p.m. today.
What's it mean to you?
Expect a sharp reaction to the share price of whichever firm loses the contract, and likely a happier reaction from the winner. And more muted reactions among the firms' team members -- EADS and GE (NYSE: GE) sided with Northrop; Rockwell Collins (NYSE: COL) and United Technologies (NYSE: UTX) joined Boeing; while Honeywell (NYSE: HON) is on both teams. If you're in the mood to try to take advantage of an overreaction by Mr. Market, consider this: Estimated at $30 billion to $40 billion in value over the next 10 to 15 years, the KC-X contract represents about 10% in extra annual revenue to Northrop, but its effect -- win or lose -- will be only half as great on Boeing's fortunes.
My feeling is that anything more than a 5% drop in share price for Boeing, if it loses, would be an overreaction worthy of a buy order. Conversely, any more than a 10% spike at Northrop would be too much to pay. Trade accordingly.
Read these quick before the announcement:
Follow along with the Global Gains team as they travel to key business centers in China to uncover the very best investing opportunities! Sign up here to receive their FREE dispatches from the road.
Terms & Conditions
RSS Headlines
Fool UK