Don't look now, but Boeing (NYSE:BA) is about to win another multibillion-dollar contract. And it will win it in South Korea.
Last month, we were talking about Boeing's sales successes on the Korean peninsula. It's racked up 36 sales of 36 AH-64E Apache attack helicopters already. Combined with its 30-Apache sale to Taiwan, the company's likely to net as much as $4 billion in sales from whirlybirds in Southeast Asia as a result. But that's just the start of the good news for Boeing stock.
Its next win could be even bigger.
South Korea is currently weighing bids for the third round of its F-X fighter fleet upgrade. Sources confirm that its decision is due out on Tuesday. Boeing stock won the first two rounds of the competition already, selling the South Koreans a total of 60 F-15K (Korean-variant) fighter jets. In this third round, Boeing's new plane, the F-15 Silent Eagle, must dogfight Europe's Eurofighter -- a joint venture among BAE Systems (LSE:BA), EADS (NASDAQOTH:EADSY), and Finmeccanica (NASDAQOTH:FINMY) -- and also its archrival Lockheed Martin (NYSE:LMT), which wants the South Koreans to buy its F-35 stealth fighter jet.
Problem is, we've already heard rumors that the South Koreans' budget for "F-X III" maxes out somewhere in the mid-$7 billions, a price too low to afford a full five dozen F-35s, and probably too little to afford 60 Eurofighter Typhoons as well. And just a few days ago, London's Financial Times confirmed that.
Citing an unnamed "South Korean official," FT reported that "Boeing's F-15 Silent Eagle was the only aircraft with a price tag low enough to make it eligible to win its Won8.3tn ($7.7bn) fighter jet tender." So all of a sudden, a three-horse race, that might have been whittled down to a two-horse showdown between Boeing and Eurofighter, has become an almost certain win for Boeing.
Almost? You mean it's not in the bag?
As Yogi Berra once observed, "It's tough to make predictions, especially about the future." I think that Boeing has the contract in the bag. I've said so in the past. But there's always the possibility that someone will do something unexpected.
For example, the South Koreans might decide they like Lockheed's F-35 so much that they simply must have it, but that -- like the Dutch last week -- they must settle for fewer planes to stay within their budget. That's one possibility. A second potential scenario is that the South Koreans up their budget to buy one of the more expensive fighter jets. Or they could "reset" the contest and tell everyone involved to come up with better prices in a new round of bidding.
All those potential curveballs aside, though, here's how I look at the facts:
- South Korea already chose Boeing planes to fulfill each of the first two rounds of F-X.
- Boeing is offering the lowest-priced plane this time around.
- Only Boeing's F-15SE sells for a price cheap enough to fit the South Korean defense budget.
Based on these three facts, it sure looks to me as if this contract is Boeing's to lose, and Boeing stock is a lock to win on Tuesday. Tune back in in two days to find out whether I'm right.
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Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.