Mixed performance on the bourses on the one hand and a generous flow of funds from the Pentagon on the other formed the picture of the defense sector last week. A 1.32% drop in the S&P 500 Aerospace & Defense (Industry) index last week and 1.02% deceleration in the Dow Jones U.S. Aerospace & Defense Index were the perpetrators of the mixed share prices.

Among the highlights, Pentagon’s prime contractor Lockheed Martin Corp. (LMT Quick QuoteLMT - Free Report) stole the show, securing a number of orders from the Department of Defense’s (“DoD”) daily funding session. As far as investor-friendly moves are concerned, Harris Corp. boosted its quarterly dividend.

(Read Defense Stock Roundup for Aug 23, 2016 here.)

Recap of the Week’s Most Important Stories

1.    Lockheed Martin received a modification contract worth $287.2 million from the U.S. Air Force for the C-130J type aircraft. Per the latest modification, Lockheed Martin will manufacture five aircraft in addition to the number of aircraft specified in the base contract.

C-130J Super Hercules, the latest model in Lockheed Martin’s Hercules family, is a four-engine, turboprop, military transport aircraft. The Hercules family boasts the longest production run of a military aircraft in history.

Meanwhile, the company has also won a modification contract from the U.S. Army to continue offering engineering, materials and equipment, personnel, testing, technical management and logistical support for upgrading close combat tactical trainer systems. Valued at $147.1 million, the contract was awarded by the Army Program Executive Office, Simulation, Training and Instrumentation, Orlando, FL. Work is scheduled to be completed by Sep 28, 2017 (read more: Lockheed Martin Wins $287M Deal for C-130J Aircraft).

Additionally, Lockheed Martin’s Mission Systems and Training unit won a contract from the U.S. Navy for engineering services and support of the Integrated Submarine Imaging Systems program. This modification contract is valued at $126.3 million (read more: Lockheed Martin Clinches $126M U.S. Navy Contract).

2.    General Dynamics (GD Quick QuoteGD - Free Report) subsidiary Electric Boat Corp. won a contract valued at $300.6 million related to Virginia Class submarines. The contract entitles Electric Boat to provide Lead Yard Services and development studies and design efforts for the said submarines. Electric Boat will also maintain, update and support the Virginia Class design and related drawings and data for each Virginia Class submarine including technology insertion throughout its construction and Post Shakedown Availability period. The work will be carried out mainly at the Groton ship yard in the U.S. state of Connecticut and be completed by Sep 2017.

The Virginia-class submarine program is a class of nuclear-powered fast attack submarines serving the U.S. Navy. These submarines are designed for a broad spectrum of open-ocean and littoral missions and will be operational until 2070.

Separately, General Dynamics National Steel and Shipbuilding Company or NASSCO, has won a contract from Matson Navigation Company, Inc., a wholly owned subsidiary of Matson, Inc. The contract is worth $511 million, as stated by Matson. Per the contract, General Dynamics will design and build two Kanaloa Class containerships for Matson. Construction will commence in early 2018, and delivery is scheduled for 2019 end and mid-2020. Matson will use the vessels to transport containers, automobiles and trucks between the continental west coast and Hawaii (read more: General Dynamics Wins $511M Deal for 2 Containerships).

3.    Harris Corp. has hiked its quarterly cash dividend by 6%, marking the 15th consecutive annual payout increase for the defense electronics and tactical radio company.

The revised dividend of 53 cents per share is up from its earlier payout of 50 cents and payable on Sep 21, 2016, to shareholders of record Sep 9, 2016. The annualized cash dividend correspondingly increases from $2.00 to $2.12 per share.

William M. Brown, chairman, president and chief executive officer of Harris said, "We remain confident in our long-term outlook and in our ability to maximize shareholder value."

4.    In a concerted effort to improve the performance of its helicopter engines at lower operating costs, the U.S. Army has offered a contract to the Advanced Turbine Engine Company (“ATEC”) to undergo a design review of its fleet of Black Hawk and Apache helicopters. The two-year contract for an undisclosed amount is an integral part of the Army's Improved Turbine Engine program that encourages the development of affordable engines without compromising on quality.

The ATEC is a joint venture forged in 2006 between two industry stalwarts, namely Honeywell International Inc. (HON Quick QuoteHON - Free Report) and Pratt & Whitney, a division of United Technologies Corporation .

The joint venture aims to design state-of-the-art engines like HPW3000 that seek to either match or excel the aggressive performance goals of the U.S. Army (read more: Honeywell, Pratt & Whitney to Design Army's Copter Engine).

Performance

The major defense stocks continued to give a mixed show over the past five trading sessions, with gains and losses balancing each other. L-3 Communications Holdings was the biggest gainer while Lockheed Martin lost the most.

For the past six months, the picture is mostly green, barring Rockwell Collins Inc. . L-3 Communications gained the most followed by Textron Inc. (TXT Quick QuoteTXT - Free Report) .

The following table shows the price movement of the major defense players over the past five trading days and during the last six months.

What’s Next in the Defense World?

Defense stocks have moved back and forth between gains and losses in recent sessions. With no major development in the cards, defense stocks will likely see no end to the volatile trend.

We remind investors that the Zacks Industry Rank for aerospace/defense is in the top one-third of the list of 256-plus industries, putting it in the positive zone for now. Despite the volatile budget environment, the prospects are still very much in place keeping in mind the ongoing recovery in the U.S. economy and the country’s involvement in the Iraqi civil war (to know more, please see: Zacks Industry Rank).

Now See Our Private Investment Ideas

While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>