The Boeing Company (NYSE:BA) shares are slightly higher on Friday as investors monitor developments in the defense contracting sector, including increased government spending on unmanned systems and artificial intelligence.
What Happened: The U.S. government has allocated $33 billion in direct spending on drones and AI for the Department of Defense, with $13.5 billion designated for unmanned systems and $16 billion for government-wide AI initiatives.
The military drone market is growing rapidly and is expected to reach $47 billion worldwide by 2032, according to Fortune Business Insights. As of 2023, North America holds about 36.1% of that market, and the U.S. alone is expected to reach $10.71 billion by 2030.
Boeing is positioning itself in this market segment. The company is developing a tiltrotor drone to work alongside Army helicopters in missions like combat and cargo transport. The unmanned aircraft can take off and land vertically, and the project mirrors similar efforts by the Air Force to build team-based combat aircraft.
Additionally, during a recent conference call, a United Airlines executive stated Boeing is “definitely getting their act together” on narrowbody aircraft deliveries, with the company providing additional aircraft beyond expectations. On the widebody front, while delays persist, there is “reason for some optimism.” Boeing’s CEO also noted that government shutdown impacts on bookings have been minimal thus far.
Chris Speights, chief engineer for Boeing’s vertical lift division, highlighted demand for reconnaissance, surveillance, target acquisition and attack missions. He noted the Army’s evolving use of helicopter platforms and indicated Boeing’s drone concept offers additional operational flexibility.
However, Boeing is still facing headwinds. The company is dealing with a strike by over 3,200 union workers in St. Louis that began on Aug. 4. The union has accused the company of refusing to negotiate in good faith, and filed a complaint with federal labor officials. The strike has affected Boeing's defense work, and lawmakers from both parties are urging the company to return to the bargaining table.
BA Analyst Ratings
Analysts have recently shown positive sentiment towards Boeing, with multiple firms maintaining or increasing their rating and target prices. Bernstein notably maintained an outperform rating on Oct. 2, while significantly raising the target price from $249.00 to $282.00. On Sept. 29, RBC Capital reiterated an outperform rating, setting a $250.00 target.
Earlier in September, Susquehanna maintained a positive rating on Boeing, setting a target price of $270.00, aligning with Vertical Research’s target, who upgraded the company to buy from hold. Bank of America Securities also kept a buy rating on the aerospace giant, boosting the target from $260.00 to $270.00 on Aug. 1.
BTDR Price Action: BA shares are climbing by 0.90% at $213.78 on Friday at the time of publication, according to Benzinga Pro.
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