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Defense Stock Roundup: LMT, BA Win Big Contracts, NOC Inks Divestiture Deal

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A decent flow of contracts from the Pentagon along with a couple of divestment and acquisition deals in the past week should have aided major defense contractors’ share price performance. However, the U.S. stock market ended on a disappointing note last Friday, after a COVID-19 aid package proposal worth $900 billion was rejected by Senate Republicans.

This might have marred growth of defense stocks and caused major indices of the Aerospace-Defense space to end in the red zone over the trailing five trading sessions. The S&P 500 Aerospace & Defense (Industry) index lost 1%, while the Dow Jones U.S. Aerospace & Defense index slipped 0.6% in the aforementioned time period.

Among the past week’s highlights, defense majors namely Lockheed Martin (LMT - Free Report) and Bell-Boeing, a joint-venture between Textron’s (TXT - Free Report) Bell unit and The Boeing Company (BA - Free Report) secured a number of notable deals from the Department of Defense’s daily funding session. Moreover, Leidos Holdings (LDOS - Free Report) signed an acquisition deal while Northrop Grumman (NOC - Free Report) divested one of its businesses.

Recap of Past Week’s Important Stories

1.    Lockheed Martin’s business unit, Sikorsky Aircraft won a modification contract for UH-60M and HH-60M combat helicopters. The deal is scheduled to be completed by Jun 30, 2022.  

Valued at $507 million, this contract will be executed at Stratford, CA (read more: Lockheed's Unit Wins $507M Deal for Combat Helicopters ).

2.    Bell-Boeing, a joint venture (JV) between Boeing and Bell Helicopter — a unit of Textron secured a modification contract worth $170.4 million involving the V-22 aircraft program.  Work related to the deal is scheduled to be completed by September 2024.    

Per the terms, the JV will conduct the production and delivery of one CMV-22B variation in quantity aircraft for the U.S. Navy and exercise options for V-22 Common Configuration Readiness and Modernization (CC-RAM) Lot 4 requirements (read more: Bell-Boeing JV Wins $170M Contract to Support V-22 Program).

3.    Leidos Holdings has signed an agreement to buy 1901 Group, a leading information technology services and cloud solutions provider, for $215 million in cash. The acquisition is projected to conclude in the first quarter of 2021, subject to customary closing conditions (read more: Leidos Signs Agreement to Acquire 1901 Group for $215M).

4.    Northrop Grumman has agreed to sell off its federal IT and mission support services business to Peraton for $3.4 billion in cash.  Peraton is an affiliate of Veritas Capital, a private investment firm.  

The deal is expected to be closed in the first half of 2021, subject to regulatory approvals and customary closing conditions (read more: Northrop Grumman to Divest Federal IT Business for $3.4B).

Performance

Over the past five trading sessions, the defense biggies put up a dismal show. General Dynamics (GD - Free Report) lost the most, with its shares down 3%, followed by L3HarrisTechnologies (LHX - Free Report) .

In the last six months, the industry's performance was a mixed bag. While Textron gained the most with 40.7% surge in share price, Lockheed lost 5.3%.

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

CompanyPast WeekLast 6 Months
LMT-1.34%-5.28%
BA-1.02%23.70%
GD-3.02%1.43%
RTX-1.38%11.64%
NOC-2.17%-5.39%
TXT-0.36%40.64%
LHX-3.00%-2.06%

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