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Defense Stock Roundup: LMT & GD Score Big Wins, HEI Beats on Q3 Earnings

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A consistent flow of funds from the Pentagon has kept defense stocks buoyant over the trailing five trading sessions. As a result, major indices of the aerospace and defense industry ended in the green. Notably, the S&P 500 Aerospace & Defense (Industry) and the Dow Jones U.S. Aerospace & Defense indices rose approximately 2.6% in the past five trading sessions.

Among the past week’s highlights, defense majors namely Lockheed Martin Corp. (LMT - Free Report) , General Dynamics Corp. (GD - Free Report) , Raytheon Company (RTN - Free Report) and The Boeing Company (BA - Free Report) secured a number of notable deals from the Department of Defense’s daily funding session. Moreover, HEICO Corp. (HEI - Free Report) released third-quarter fiscal 2019 results.

Recap of Past Week’s Important Stories

1. Lockheed Martin’s Aeronautics business segment secured a $2.4-billion modification contract to procure initial spares for F-35 Lightning II Joint Strike Fighter jets. The deal has been awarded by the Naval Air Systems Command, Patuxent River, Maryland.

Majority of the task will be carried out in Fort Worth, TX; El Segundo, CA; Owego, NY; Samlesbury and Cheltenham, the United Kingdom (read more: Lockheed Wins $2.4B Deal to Supply Spares for F-35 Jets).

2. General Dynamics’ business subsidiary, National Steel and Shipbuilding Co. ("NASSCO"), clinched a $1.08-billion contract for the construction of Expeditionary Sea Base ("ESB") 6 and 7 ships. The deal was awarded by the Naval Sea Systems Command, Washington, DC.

Work related to the deal is expected to get completed by January 2025. Majority of the task will be performed in San Diego, CA, (read more: General Dynamics' NASSCO Wins $1B Deal to Build ESB-6 & 7).

3. Raytheon won a hybrid contract worth $534 million to provide the Horizontal Technology Integration Second Generation Forward Looking Infrared (2GF) Commander’s Independent Thermal Viewer ("CITV") to the U.S. Army. The deal was awarded by the U.S. Army Contracting Command, Aberdeen Proving Ground, MD. The work is expected to get completed by Aug 23, 2026 (read more: Raytheon Wins $534M Second Generation Infrared CITV Deal).

The company also secured a $349-million contract related to the Phase 2 of the Maritime Strike Tomahawk Rapid Deployment Capability. The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.

Majority of work related to the deal will be executed in Tucson, AZ, while the entire deal is scheduled to get completed by February 2023 (read more: Raytheon Wins $349M Navy Deal to Support Tomahawk Missiles).

Raytheon’s Missiles Systems business unit clinched a modification contract worth $190.5 million in relation to the Evolved Sea Sparrow Missiles ("ESSM") Block 2. The deal was awarded by the Naval Sea Systems Command, Washington, DC.

Majority of work related to the deal will get executed in Tucson, AZ. Raytheon is expected to complete the task by March 2023 (read more: Raytheon Wins $191M Deal to Support ESSM Block 2 Program).

4. Boeing secured a $500-million contract for providing F-15QA aircrew and maintenance training to support the Qatar Emiri Air Force ("QAEF"). Work related to the deal is scheduled to be completed by August 2026.

The contract was awarded by the Air Force Installation Contracting Agency/338th Specialized Contracting Squadron, Joint Base San Antonio-Randolph, TX, (read more: Boeing Wins $500M Deal to Support Qatar's F-15 Program).

The company also won a $145.9-million modification contract, under which it will remanufacture 11 Apache aircraft, and new build Longbow Crew Trainer and spares. Work related to the deal is scheduled to be completed by Mar 29, 2024.

The contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, Alabama (read more: Boeing Secures $146M FMS Deal to Aid Apache Aircraft Program).

5. HEICO Corp reported third-quarter fiscal 2019 earnings of 59 cents per share, which surpassed the Zacks Consensus Estimate by 11.3% and increased 20.4% on a year-over-year basis. Net sales of $532.3 million outpaced the Zacks Consensus Estimate by 3.6% and increased 14.3% year over year.

As of Jul 31, 2019, cash and cash equivalents summed $59 million compared with $64.1 million as of Apr 30, 2019. As of Jul 31, 2019, the company generated cash provided by operating activities was $313.4 million compared with $214.8 million as of Jul 31, 2018.

For fiscal 2019, HEICO Corp projects net sales growth of 14-15%, up from its prior growth estimates of 12-13% (read more: HEICO Q3 Earnings Surpass Estimates, FY19 View Up).

Performance

Over the past five trading sessions, defense biggies put up a mixed show. Boeing gained the most with its share price rising 2.4%, while Lockheed Martin and Textron suffered a decline.

The industry's performance over the last six months has been mixed as well. Leidos Holdings gained the most this time with its share price rising more than 34%, while Textron lost 18%.

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

CompanyLast WeekLast 6 Months
LMT1.86%24.22%
BA2.35%-17.68%
GD1.02%11.93%
RTN-2.27%-1.86%
NOC-1.10%28.20%
TXT-0.60%-18.80%
LHX0.00%12.78%

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