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Defense Stock Roundup: LMT, BA Win Contracts, GD-CSRA Deal in Progress
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Following President Trump’s decision to dismiss U.S. Secretary of State Rex Tillerson from office, major defense stocks in the United States moved north in the pre-market trading session on Mar 13. Trump has proposed Mike Pompeo, CIA chief, to replace him. Pompeo is a hard-line conservative.
Wall Street took a hit yesterday following a technology sell-off that sent the Nasdaq indexes to their steepest losses in six weeks. A data breach report at Facebook took a toll on the U.S. stock market and, in turn, weighed on the defense industry, outweighing the surge it gained due to Tillerson’s exit news.
Consequently, major indices in the Aerospace-Defense industry ended in the red over the past five trading sessions. Evidently, the S&P 500 Aerospace & Defense (Industry) index fell 1.4% over the same time frame, while the Dow Jones U.S. Aerospace & Defense index suffered a drop of 1.5%. Nevertheless, in keeping with its usual trend, the U.S. defense industry witnessed a generous flow of funds from the Pentagon over the trailing five sessions.
Among the highlights of the last week, defense majors Lockheed Martin Corp. (LMT - Free Report) , General Dynamics Corp. (GD - Free Report) , The Boeing Company (BA - Free Report) and Raytheon Company secured a number of orders from the Department of Defense’s daily funding session. Meanwhile General Dynamics progressed with the CSRA acquisition.
Recap of Last Week’s Key Stories
1. Lockheed Martin recently clinched a contract worth $3.5 billion for providing Army training aids, devices, simulators and simulations, maintenance, sustainment, operations and support to instrumentation systems and live-fire ranges. Work related to the deal is expected to be completed by Apr 30, 2020.
The contract was awarded by the U.S. Army Contracting Command, Orlando, FL. Per the deal, work locations and funding to perform the task will be decided with each order (read more: Lockheed Wins $3.5B Deal to Offer Army Training Solutions).
Moreover, the company’s Aeronautics business segment secured a modification contract worth $1.5 billion for purchase of long lead material and parts related to low rate initial production of F-35 Lightning II air systems. Work related to this deal is scheduled to be completed by December 2018.
The contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Per the modification, the long lead material and parts will be acquired for 145 of the 13th Lot of F-35 jet for the Services, non-U.S. DoD participants and foreign military sales (FMS) customers, and for 69 of the 14th Lot of the aircraft for the non-U.S. DoD participants and FMS customers.
2. The subsidiary of United Launch Alliance (“ULA”), a joint venture of Lockheed Martin and Boeing, secured a contract worth $354.8 million for its satellite launch services. Per the terms, United Launch Services, LLC (“ULS”) — the subsidiary — will deliver AFSPC-8 and AFSPC-12 satellites fortheir intended orbit.
The contract was awarded by the Contracting Division, Launch Systems Enterprise Directorate, Space and Missile Systems Center, Los Angeles Air Force Base, CA. Per the modification contract, ULS will carry out launch vehicle production, mission integration, launch operations and spaceflight certification for the AFSPC-8 and AFSPC-12 missions.
While AFSPC-12 satelliteswill be delivered post the completion of operations by March 2020,the AFSPC-8 satellites will be delivered after the completion of operations in June 2020 (read more: Boeing-Lockheed JV Unit Wins $354M AFSPC Satellite Contract).
3. General Dynamics’ subsidiary Electric Boat won a modification contract worth $696.2 million for supplying long lead time materials for the construction of fiscal 2019 and fiscal 2020 Virginia-class submarines.
Majority of the work related to the deal will be carried out in Sunnyvale, CA; while the rest will be executed in different parts across the United States as well as Loanhead, United Kingdom. The contract was awarded by the Naval Sea Systems Command, Washington, DC.
Per the terms, the deal will offer long lead time material for steam and electric plant components; the main propulsion unit efforts and ship service turbine generator efforts; and miscellaneous hull, mechanical and electrical system components (read more: General Dynamics Wins $696M Deal for Nuclear Submarines).
Meanwhile, General Dynamics recently entered into a bidding war with CACI International for acquiring IT service provider CSRA Inc. . While General Dynamics offered last month $9.6 billion, including a $2.8 billion of debt, for the CSRA buyout, CACI proposed $7.2 billion in cash for the takeover.
In spite of the unsolicited offer that CACI made to acquire CSRA, General Dynamics remains confident of the deal and plans to proceed with its tender offer to acquire CSRA’s all outstanding shares. Notably, the tender offer for CSRA shares has commenced on Mar 5, 2018, and is scheduled to expire on Apr 2.
With General Dynamics having secured the necessary regulatory approvals for the transaction, the chance of CACI snatching the deal from this shipbuilder is highly unlikely (read more: Can General Dynamics Beat CACI to Acquire CSRA for $9.6B?).
4. Raytheon recently won a delivery contract worth $511 millionfor the Cobra Dane radar. Per the terms, the company will conduct operation, maintenance and sustainment of the Cobra Dane radar.
The contract was awarded by the Air Force Life Cycle Management, Peterson Air Force Base, CO. Work related to the deal will be executed at Eareckson Air Station, Shemya, Alaska, and is expected to be completed by March 2025.
Moreover, the company has secured a FMS contract worth $150.4 million for providing staffing and training services to support the Qatar Patriot Air Defense Missile Systems.
The contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, Huntsville, AL. Raytheon will utilize fiscal 2018 foreign military sales funds to complete the task.
Over the last five trading sessions, most of the defense biggies put up a dismal show, hit by the broader market volatility. Boeing lost the most with its share price declining 3% in this period.
Over the last six months, the entire industry put up a stellar performance. Keeping up with its usual trend, Boeing gained the most, with its shares gaining 29.9%, followed by Northrop Grumman.
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
-0.41%
9.68%
BA
-2.98%
29.87%
GD
-0.05%
10.23%
RTN
0.13%
14.04%
NOC
0.10%
23.17%
COL
-0.07%
4.45%
TXT
-0.15%
11.76%
LLL
0.00%
9.02%
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And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Defense Stock Roundup: LMT, BA Win Contracts, GD-CSRA Deal in Progress
Following President Trump’s decision to dismiss U.S. Secretary of State Rex Tillerson from office, major defense stocks in the United States moved north in the pre-market trading session on Mar 13. Trump has proposed Mike Pompeo, CIA chief, to replace him. Pompeo is a hard-line conservative.
Wall Street took a hit yesterday following a technology sell-off that sent the Nasdaq indexes to their steepest losses in six weeks. A data breach report at Facebook took a toll on the U.S. stock market and, in turn, weighed on the defense industry, outweighing the surge it gained due to Tillerson’s exit news.
Consequently, major indices in the Aerospace-Defense industry ended in the red over the past five trading sessions. Evidently, the S&P 500 Aerospace & Defense (Industry) index fell 1.4% over the same time frame, while the Dow Jones U.S. Aerospace & Defense index suffered a drop of 1.5%. Nevertheless, in keeping with its usual trend, the U.S. defense industry witnessed a generous flow of funds from the Pentagon over the trailing five sessions.
Among the highlights of the last week, defense majors Lockheed Martin Corp. (LMT - Free Report) , General Dynamics Corp. (GD - Free Report) , The Boeing Company (BA - Free Report) and Raytheon Company secured a number of orders from the Department of Defense’s daily funding session. Meanwhile General Dynamics progressed with the CSRA acquisition.
Recap of Last Week’s Key Stories
1. Lockheed Martin recently clinched a contract worth $3.5 billion for providing Army training aids, devices, simulators and simulations, maintenance, sustainment, operations and support to instrumentation systems and live-fire ranges. Work related to the deal is expected to be completed by Apr 30, 2020.
The contract was awarded by the U.S. Army Contracting Command, Orlando, FL. Per the deal, work locations and funding to perform the task will be decided with each order (read more: Lockheed Wins $3.5B Deal to Offer Army Training Solutions ).
Moreover, the company’s Aeronautics business segment secured a modification contract worth $1.5 billion for purchase of long lead material and parts related to low rate initial production of F-35 Lightning II air systems. Work related to this deal is scheduled to be completed by December 2018.
The contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Per the modification, the long lead material and parts will be acquired for 145 of the 13th Lot of F-35 jet for the Services, non-U.S. DoD participants and foreign military sales (FMS) customers, and for 69 of the 14th Lot of the aircraft for the non-U.S. DoD participants and FMS customers.
Majority of the work will be executed in Fort Worth, TX; El Segundo, CA; Warton, United Kingdom and Orlando, FL (read more: Lockheed Martin Secures $1.5B Deal for F-35's Spare Parts).
2. The subsidiary of United Launch Alliance (“ULA”), a joint venture of Lockheed Martin and Boeing, secured a contract worth $354.8 million for its satellite launch services. Per the terms, United Launch Services, LLC (“ULS”) — the subsidiary — will deliver AFSPC-8 and AFSPC-12 satellites fortheir intended orbit.
The contract was awarded by the Contracting Division, Launch Systems Enterprise Directorate, Space and Missile Systems Center, Los Angeles Air Force Base, CA. Per the modification contract, ULS will carry out launch vehicle production, mission integration, launch operations and spaceflight certification for the AFSPC-8 and AFSPC-12 missions.
While AFSPC-12 satelliteswill be delivered post the completion of operations by March 2020,the AFSPC-8 satellites will be delivered after the completion of operations in June 2020 (read more: Boeing-Lockheed JV Unit Wins $354M AFSPC Satellite Contract).
3. General Dynamics’ subsidiary Electric Boat won a modification contract worth $696.2 million for supplying long lead time materials for the construction of fiscal 2019 and fiscal 2020 Virginia-class submarines.
Majority of the work related to the deal will be carried out in Sunnyvale, CA; while the rest will be executed in different parts across the United States as well as Loanhead, United Kingdom. The contract was awarded by the Naval Sea Systems Command, Washington, DC.
Per the terms, the deal will offer long lead time material for steam and electric plant components; the main propulsion unit efforts and ship service turbine generator efforts; and miscellaneous hull, mechanical and electrical system components (read more: General Dynamics Wins $696M Deal for Nuclear Submarines).
Meanwhile, General Dynamics recently entered into a bidding war with CACI International for acquiring IT service provider CSRA Inc. . While General Dynamics offered last month $9.6 billion, including a $2.8 billion of debt, for the CSRA buyout, CACI proposed $7.2 billion in cash for the takeover.
In spite of the unsolicited offer that CACI made to acquire CSRA, General Dynamics remains confident of the deal and plans to proceed with its tender offer to acquire CSRA’s all outstanding shares. Notably, the tender offer for CSRA shares has commenced on Mar 5, 2018, and is scheduled to expire on Apr 2.
With General Dynamics having secured the necessary regulatory approvals for the transaction, the chance of CACI snatching the deal from this shipbuilder is highly unlikely (read more: Can General Dynamics Beat CACI to Acquire CSRA for $9.6B? ) .
4. Raytheon recently won a delivery contract worth $511 millionfor the Cobra Dane radar. Per the terms, the company will conduct operation, maintenance and sustainment of the Cobra Dane radar.
The contract was awarded by the Air Force Life Cycle Management, Peterson Air Force Base, CO. Work related to the deal will be executed at Eareckson Air Station, Shemya, Alaska, and is expected to be completed by March 2025.
Moreover, the company has secured a FMS contract worth $150.4 million for providing staffing and training services to support the Qatar Patriot Air Defense Missile Systems.
The contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, Huntsville, AL. Raytheon will utilize fiscal 2018 foreign military sales funds to complete the task.
Work related to the deal will be performed in Doha, Qatar and is scheduled to be completed by Mar 15, 2018 (read more: Raytheon Wins $150M FMS Deal to Aid Qatar's Patriot System ).
Performance
Over the last five trading sessions, most of the defense biggies put up a dismal show, hit by the broader market volatility. Boeing lost the most with its share price declining 3% in this period.
Over the last six months, the entire industry put up a stellar performance. Keeping up with its usual trend, Boeing gained the most, with its shares gaining 29.9%, followed by Northrop Grumman.
The following table shows the price movement of the major defense players over the past five trading days and during the last six months.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7% and +90.2%, respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>