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Defense Stock Roundup: Stocks Rally on Trump's Afghanistan Remark, BA & LMT Win Big

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Major defense stocks in the United States moved north following President Trump’s Afghanistan speech in the early trading session on Aug 22. Trump announced that instead of withdrawing troops from Afghanistan, he will increase the military spending to win the nation’s longest war, which is now in its 17th year. Trump also criticized Pakistan for being a safe haven for terrorists.

In tandem with these announcements, defense stocks, which have been on an upward trajectory since Trump’s presidential victory last November, witnessed further upside over the last five trading sessions.

A generous flow of funds from the Pentagon also boosted defense stocks’ prospects. As a result, major indices of the Aerospace sector ended in the green. While the S&P 500 Aerospace & Defense (Industry) Index inched up 0.8%, the Dow Jones U.S. Aerospace & Defense Index rose 0.9% in the last five trading sessions.

Among last week’s highlights, defense primes Lockheed Martin Corp. (LMT - Free Report) , The Boeing Company (BA - Free Report) , Northrop Grumman Corp. (NOC - Free Report) , Raytheon Company (RTN - Free Report) and L3 Technologies, Inc. (LLL - Free Report) secured notable contracts from the Department of Defense (DoD).

(Read: Defense Stock Roundup for Aug 18, 2017 here)

A Look Back at Last Week’s Key Stories

1. Pentagon’s largest defense contractor, Lockheed Martin’s, Aeronautics business division secured a contract worth $427.1 million regarding F-35 Joint Strike Fighter aircraft. The deal was awarded by the Naval Air Systems Command, Patuxent River, MD.

Work related to this deal is scheduled to be over by December 2020. Per the terms of the agreement, Lockheed Martin will procure ancillary military equipment and pilot flight equipment for low rate initial production (LRIP) of the 11th Lot of F-35 jets. The services will be offered to the Air Force, Marine Corps, Navy, non-Department of Defense (DoD) participants and foreign military sales (FMS) customers.

Majority of the work will be carried out in Inglewood, CA and White Plains, NY (read more:Lockheed Martin Wins $427M Deal to Support F-35 Aircraft).

Lockheed Martin also clinched another notable contract in the last five trading session from the DoD. The deal, valued at $900 million, involves the replacement of the AGM-86B air-launched cruise missile. Work related to this deal is scheduled to be over by 2022.

Per the terms of the deal, Lockheed Martin will conduct technology maturation and risk reduction acquisition phase for the Long Range Standoff weapon (LRSO) — a next-generation cruise missile. The contract was awarded by the Air Force Nuclear Weapons Center, Air Delivered Capabilities Directorate, Eglin Air Force Base, FL. Work will be carried out in Orlando, FL (read more: Lockheed Martin Wins $900M Deal to Replace AGM-86B Missile).

2. Defense major Raytheon also won a contract worth $900 million for the replacement of AGM-86B air-launched cruise missile. Work related to this deal will be carried out in Tucson, AZ.

Per the terms of the deal, Raytheon will conduct technology maturation and risk reduction acquisition phase for the LRSO. The contract was awarded by the Air Force Nuclear Weapons Center, Air Delivered Capabilities Directorate, Eglin Air Force Base, FL. Work pertaining to this deal is expected to be over by 2022.

3. Aerospace giant Boeing clinched a $349.2 million contract for Ground Based Strategic Deterrent (GBSD). Per the terms of the agreement, Boeing will deliver an affordable total system replacement of Minuteman III missile to meet the intercontinental ballistic missiles operational requirements. The replacement will be done by conducting technology maturation and reducing technical risk of this weapon system.

Work related to this deal will be carried out in Huntsville, Al, and various other locations and is scheduled to be over by Aug 20, 2020.

Notably, GBSD is the next generation intercontinental ballistic missile (ICBM) for the U.S. Air Force. Boeing’s Minuteman is one such ICBM (read more: Boeing Clinches $349M Deal to Upgrade Minuteman Missiles).

Boeing secured another contract, worth $222.5 million, to support the Royal Saudi Land Forces Aviation Command (RSLFAC).  This is a modification deal for eight CH-47F new build helicopters.

The contract was awarded by the U.S. Army Contracting Command Redstone Arsenal, Redstone Arsenal, AL. Work related to this deal is scheduled to be over by Jul 30, 2021 and will be carried out in Ridley Township, PA (read more: Boeing Wins $223M Navy Deal for CH-47F Helicopters).

4. Defense major Northrop Grumman won a contract worth $329 million from the U.S. Air Force for GBSD. All work related to this contract will be primarily carried out at the Redondo Beach, CA facility along with various other locations.

Per the contract, the company will work toward the replacement of aging Minuteman III which will lower the associated technical risk in the missile to meet intercontinental ballistic missiles operational requirements. Northrop Grumman is expected to finish the work by Aug 20, 2020 (read more: Northrop Wins $329M Deal to Upgrade Minuteman Missile).

5. L3 Technologies’ business unit Vertex Aerospace won a modification contract worth $173 million from the U.S. Navy for T-45 Goshawk aircraft. Majority of the work will be executed in the Naval Air Station Kingsville, TX and NAS Meridian, MI.

Per the terms of the agreement, the company will provide organizational, intermediate, and depot level maintenance, logistics, and engineering to support and maintain 201 Navy T-45 Goshawk aircraft. It will also provide related equipments to support flight and test and evaluate operations of the Goshawk. Work pertaining to the deal is scheduled to be over by September 2018.

Performance

Over the last five trading sessions, most of the defense biggies have put up an impressive show, except Northrop Grumman and Textron Inc. (TXT - Free Report) . Notably, shares of Rockwell Collins, Inc. (COL - Free Report) surged the maximum, 5.36%, in the last five days, followed by Boeing.

However, over the last six months, the entire industry has put up a stellar performance. Rockwell Collins gained the most, with its shares rising 36.72%, followed by Boeing.

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

CompanyLast WeekLast 6 Months
LMT0.49%13.76%
BA1.15%34.55%
GD0.56%5.19%
RTN0.58%15.97%
NOC-0.16%9.59%
COL5.36%36.72%
TXT-0.23%1.63%
LLL0.98%7.74%

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