The Boeing Company BA recently secured a contract for the F-15 Japan Super Interceptor (F-15 JSI) program. The award has been offered by the Air Force Life Cycle Management Center, Wright-Patterson AFB, OH. 

Valued at $129.2 million, the contract is expected to be completed by Jan 31., 2030. Work related to this deal will be carried out in St. Louis, MO; Eglin Air Force Base, FL; El Segundo, CA; and Hunt Valley, MD. 

Boeing and the F-15 JSI Program

In July 2020, the U.S. Air Force and Boeing signed a Foreign Military Sale contract to convert Japan’s existing F-15J fighters to F-15 Japan Super Interceptor (F-15JSI). This contract is aimed at upgrading Japan’s F-15 fighter fleet with highly advanced sensors and avionics suite. The idea is to significantly enhance the interoperability of these jets, which are operated by the Japanese government. 

While Boeing and Mitsubishi Heavy Industries were the primary partner companies in this program, other industry players like BAE Systems BAESY and RTX Corp. RTX have also been vital contributors to this modernization program.

What’s Favoring the BA Stock in Japan?

The growing threats in the Indo-Pacific region, such as hypersonic, long-range, re-targetable missiles and advanced early warning systems capable of detecting stealth fighters, necessitated the modernization of Japan’s air defense capabilities. Boeing-built F-15, with its superior speed, range and payload capacity, stood out as an ideal platform to address these challenges.

The F-15, with its exceptional range, speed and weapon-carrying capacity, perfectly addresses these challenges. As one of the fastest and most capable fighters globally, it is uniquely positioned to deter and neutralize evolving regional threats. Furthermore, its advanced radar processors, superior data-link capabilities and enhanced payload capacity make it an indispensable asset in securing air dominance.

To this end, it is imperative to mention that the American jet maker has been working closely with Japan to create innovative aerospace solutions for more than 70 years now, with the United States and Japan being strong allies for a long time. By virtue of its long-standing partnership with the Japanese Air Force, Boeing plays a crucial role in bolstering this nation’s aerial security. The latest contract win is a bright example of that.

What Lies Ahead for BA Stock?

As emerging geopolitical threats are forcing nations across the globe to boost their defense spending significantly in recent times, Japan, being no exception, has become one of the major forerunners in this space. Evidently, the Japan’s Ministry of Defense has submitted a budget request of approximately $59.76 billion for fiscal 2025, suggesting a 7.5% increase over the current year figure. Looking ahead, Japan is expected to be the world's third-largest defense spender by 2027, after the United States and China (as per the Morder Intelligence firm). 

Such an impressive defense investment strategy adopted by the Japanese government should bolster Boeing’s growth prospects in Japan, considering its well-established footprint in this nation. Notably,  Japan’s Self Defense Forces have built and operated the largest fleets of BA’s F-15 fighters and CH-47 Chinook helicopters outside the United States. Also, Japan became the first international customer for BA’s KC-46A Pegasus tanker in October 2015.

Other Defense Stocks to Benefit

Defense stocks other than Boeing that have a strong presence in Japan and are thus expected to benefit from the expanding Japanese defense investment have been discussed below.

RTX: Its APG-82(V)1 AESA radar is integrated into the F-15 JSI program. Moreover, the F-100 engine, manufactured by RTX’s Pratt &Whitney, powers the F-15 jets. In October 2024, it was announced that RTX’s Raytheon business has entered full-rate production for Standard Missile-3 Block IIA,  thereby clearing the way for a $1.9 billion award from the U.S. Missile Defense Agency in July 2024 to produce rounds for both the U.S. government and Japan Ministry of Defense.

RTX boasts a long-term (three to five years) earnings growth rate of 10.2%. The Zacks Consensus Estimate for 2024 sales indicates year-over-year growth of 7.2%.

BAE Systems: Its AN/ALQ-250 Eagle Passive Warning Survivability Systems is being installed in Japan’s F-15 super interceptor jets. Boeing has also selected the company to upgrade the F-15 super interceptor jets' fly-by-wire flight control computers. 

BAESY boasts a long-term earnings growth rate of 11.1%. The Zacks Consensus Estimate for 2024 sales indicates year-over-year growth of 37.7%.

Lockheed Martin LMT: It delivers cutting-edge technologies and innovations to support the future defense prosperity of Japan. More than 550 military helicopters have been produced by LMT for the Japan Self-Defense Forces. The Aegis Combat System, with Lockheed being a major contractor in this program, has been providing advanced sea, air and undersea threat detection capabilities to Japan’s Kongo and Atago-class ships for the past 25 years.

LMT boasts a long-term earnings growth rate of 4.5%. The Zacks Consensus Estimate for 2024 sales indicates year-over-year growth of 5.5%.

BA Stock’s Price Movement

Shares of BA have lost 17% in the past six months compared to the aerospace defense industry’s 3.8% decline.

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BA’s Zacks Rank

BA currently carries a Zacks Rank #5 (Strong Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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