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All the big defense stocks closed in the green over the last five trading sessions, except for The Boeing Co. (BA - Analyst Report). 
 
Among the defense majors, Textron Inc. (TXT - Analyst Report) kicked off second quarter earnings on an upbeat note while reaffirming its 2014 bottom-line expectation. Among the important updates, FMS or Foreign Military Sales continued to buoy up the defense sector with sales of $565 million promised to India last week (see the last recap here: Defense Stock Roundup for Jul 15, 2014).
 
Iraq Update
 
The Iraqi ambassador Lukman Faily urged U.S. officials to provide more support, including precision air strikes and other forms of military assistance to help Iraq fight the Islamic State in Iraq and Syria (ISIS).
 
However, a classified military assessment of Iraq’s security forces concluded that only about half of the country's military units are capable of being advised by American troops, while many have been permeated by either Sunni insurgent informants or Shiite militia members backed by Iran. These are the same militias that killed American troops during the U.S. invasion of Iraq. The published report also stated that the American troops might face security risks if they are told to train certain military units as Iraqi forces are reliant on Shiite militias as well as advisers from Iran's paramilitary Quds Force.
 
Opposition to America’s intervention in Iraq mounted as nearly 70 House Democrats sent a letter to President Barack Obama last week demanding congressional approval before ordering any American military operation in Iraq. The Democrats were joined by nine Republicans on the letter.
 
Meanwhile, the U.S. is running behind schedule for the first shipment of American Apache attack helicopters and F-16 fighter planes. The first two of 36 F-16s are now scheduled to be delivered to Iraq this fall. However, Iraqi pilots won’t be able to actually fly them as they are yet be fully trained. The U.S. has also struck a deal to sell 24 Apache helicopters to Baghdad. 
 
Lukman Faily expressing anguish over the delays claimed that it has had an adverse impact on Iraq. He also added that the slow pace of shipments raised questions about Washington’s commitment to Iraq. Foreign military sales are often mired in congressional bottlenecks that slow down deliveries. 
 
Recap of the Week’s Most Important Stories
 
1. Diversified U.S. conglomerate Textron reported better-than-expected second quarter 2014 earnings buoyed by higher contribution from most of its business segments. The Beechcraft acquisition also acted as a catalyst to the company’s quarterly performance. Textron also reaffirmed its 2014 earnings per share from continuing operations guidance, taking into consideration the Beechcraft acquisition (read more: Textron Beats Q2 Earnings Ests on Higher Rev, Keeps Guidance).
 
2. The Pentagon awarded Lockheed Martin (LMT - Analyst Report) an FMS contract worth up to $564.7 million to supply India's military with six C-130J-30 Super Hercules military transport aircraft. The contract also supports funding for Lockheed field service representatives to work in India for three years. This is required for providing post-delivery support following the first aircraft delivery. The Pentagon confirmed that this contract will be completed by Apr 30, 2020 and will fetch Lockheed Martin nearly $2.1 billion in total.
 
3 .Northrop Grumman Corp. (NOC - Analyst Report) received a $300 million indefinite-delivery/indefinite-quantity, cost-plus-incentive-fee contract from the Pentagon for Air Force weather services. The contract calls for Northrop to provide systems engineering, management, and sustainment services to the U.S. Air Force Weather Agency's enterprise information systems. The agency generates and circulates real-time weather services and products worldwide. This five-year contract will run through Jul 31, 2019.
 
4. Last week, the defense subcommittee of the Senate Appropriations Committee approved a legislation that comprised a $549.3 billion spending plan for the Defense Department’s fiscal year 2015 base budget and Overseas Contingency Operations (OCO) fund. This compares unfavorably with $572 billion enacted in fiscal year 2014 in addition to $550.7 billion in the President’s budget request. The fiscal 2015 base budget appropriation is $489.6 billion with $59.7 billion for OCO of the Departments of Defense and State. For fiscal 2014, the enacted OCO was $85.2 billion.
 
Performance
 
The biggest gainer Northrop Grumman rose 1.75% over the past one week, with Raytheon Co. (RTN - Analyst Report) close at its heels. In the past six months, the companies have reported in the green (except for Boeing). General Dynamics Corp. (GD - Analyst Report) and L-3 Communications Holdings Inc. (LLL - Analyst Report) maintained their share price appreciation story registering double-digit growth, with GD leading the way. All the other biggies have reported single-digit share price appreciation in the last six-month time span. Boeing has, however, lost 11.13%.
 
The following table shows the price movement of the major defense players over the past five trading days and during the last six months.
 

Company

Last Week

Last 6 months

LMT

+0.56%

+4.04%

BA

-1.04%

-11.13%

GD

+0.89%

+18.77%

RTN

+1.51%

+3.65%

NOC

+1.75%

+3.99%

COL

+1.44%

+1.57%

TXT

+0.13%

+2.13%

LLL

+1.37%

+12.71%

 
What’s Next in the Defense World?
 
Boeing, Northrop, General Dynamics and B/E Aerospace Inc. (BEAV - Snapshot Report) are slated to report their second-quarter earnings on Jul 23. Raytheon will report its results on Jul 24, 2014 before the market opens. 
 
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