Back to top

Defense Stock Roundup: Contracts for Lockheed Martin F-35, Raytheon Clinches NORAD

Read MoreHide Full Article

In spite of economic uncertainties and global instabilities taking a toll on the stock markets wide and far, defense spending, the primary driver in the space, remained unabated in the last five trading days.

Lockheed Martin Corp. (LMT - Free Report) maintained its stature as the leading defense play when it came to securing funds from the Department of Defense (DoD). Its most pricey weapons system – the F-35 – won a number of repeat contracts. But Raytheon Co. (RTN - Free Report) beat out Lockheed Martin to win the NORAD contract to provide round-the-clock support and maintenance services.

Aerospace giant Boeing Co. (BA - Free Report) unveiled a new commercial spaceship assembly plant at Cape Canaveral, FL for its CST-100 Starliner spacecraft.

(Read Defense Stock Roundup for Sep 1, 2015 here.)

Recap of the Week’s Most Important Stories

1.    Lockheed Martin seems to be on a winning streak with most of the orders going to its F-35 program. Last week, its Aeronautics division was awarded by the U.S. Navy the F-35 Lightning II Block 3F upgrade contract for the Air Force, Marine Corps, Navy, and the government of the United Kingdom. The contract has a ceiling value of $311.4 million. This follows a large contract awarded in the earlier week, worth $430.9 million, to provide support equipment and services for the ninth batch of F-35 fighter jets (read more:Lockheed Martin's F-35 Winning Streak Continues).

Again, this defense prime won a separate U.S. Navy contract to modernize Aegis hardware and software on naval ships. The recent win expands the company’s 40-year legacy for integrating the U.S. Navy's Aegis Combat System. The 10-year contract awarded by the DoD can potentially go up to $428 million if all options are exercised (read more: Lockheed Martin to Integrate Aegis on US Navy Ships).

2.    Raytheon Company will finally proceed with a multi-year U.S. Air Force contract valued at $700 million, outwitting its opponent Littleton-based Lockheed Martin Space Systems, a unit of Lockheed Martin Corp. The contract, which was initially awarded in Apr 2015, calls for Raytheon to provide round-the-clock support and maintenance services to NORAD's Cheyenne Mountain Complex along with updating software systems covering warning and attack assessment systems for air, missile and space threats (read more: Raytheon Gets Go Ahead for $700M NORAD Contract).

This missile maker also secured as many as six defense contracts from the Pentagon’s daily funding list on Aug 31, amounting to $355 million (read more: Raytheon Company Wins $355M Defense Contracts).

3.    Boeing Co. opened a new commercial spaceship assembly plant at Cape Canaveral, FL that would prepare its newly named CST-100 Starliner spacecraft. The spacecraft will be prepared for flight at a hangar that was used by NASA for its space shuttles.

The aerospace giant’s new Starliner capsule will be used by NASA to fly crews to the International Space Station. The spaceship will debut its test flight in 2017.

Starliners will take off from the nearby Cape Canaveral Air Force Station aboard Atlas 5 rockets. These rockets are built and flown by United Launch Alliance, a collaboration between Lockheed Martin and Boeing.

4.    United Technologies Corp.’s (UTX - Free Report) business wing Pratt & Whitney of East Hartford, CT, won a $249.8 million modification contract to procure low-rate initial production (LRIP) Lot 9 propulsion system initial spares. These are required to form a global spares pool that would include initial spare engines, modules, and parts needed in support of the LRIP Lot 9 F-135 propulsion systems for the F-35 Lightning II Joint Strike Fighter aircraft. The majority of the contract work – 93% to be precise – will be performed in East Hartford, CT. It will likely run through Jul 2018.

5.    Alliant Techsystems Operations LLC, a subsidiary of Orbital ATK, Inc. , received a $118.8 million contract to procure Advanced Anti-Radiation Guided Missile (“AARGM”) services for the U.S. Navy, Australia and Italy.

The procurement involves conversion of AGM-88B High-Speed Anti-Radiation Missiles to 142 AGM-88E All-Up-Rounds and 12 Captive Air Training Missiles. The contract work is slated for completion in Dec 2018.

6.    Huntington Ingalls Industries Inc. (HII - Free Report) has won a modification contract from the U.S. Naval Sea Systems Command of the District of Columbia to provide support services for nuclear submarines. Support services will be provided for Los Angeles, Seawolf, Virginia, and Ohio-class submarines; special mission submersible interfaces; and submarine support facilities. The contract also involves potential foreign military sales programs (read more: Huntington Ingalls Wins $109.4M U.S. Navy Contract).

Performance

In the last five trading days, share prices of all the major defense companies showed lukewarm performances with most of them ending in the red. Though the shares of Lockheed Martin, Raytheon and Rockwell Collins Inc. appreciated, they showed muted growth of less than 1%.

In the last six months, the picture remains disappointing as well. Share prices of most of the major companies sunk barring Lockheed Martin and General Dynamics, with both recording slender gains. L-3 Communications lost the most with Boeing on its heels.

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

0.72%

3.39%

BA

-0.70%

-14.85%

GD

-0.60%

4.66%

RTN

0.30%

-2.39%

NOC

-0.88%

-0.01%

COL

0.01%

-8.77%

TXT

-0.39%

-11.35%

LLL

-0.80%

-17.28%


What’s Next in the Defense World?

In the next five days, no major development is lined up on the defense front. We note that defense stocks have been experiencing volatility with gains and losses in recent months and investors can expect this volatile movement to continue in the coming days as well.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Published in