For Immediate Release
Chicago, IL – February 2, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Lockheed Martin Corporation (LMT - Analyst Report) , The Boeing Company (BA - Analyst Report) , Northrop Grumman Corporation (NOC - Analyst Report) , L-3 Communications Holdings Inc. (LLL - Analyst Report) and Raytheon Company (RTN - Analyst Report) .
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: https://at.zacks.com/?id=5513
Here are highlights from Wednesday’s Analyst Blog:
Defense Pros Miss India – What’s Next?
French conglomerate Dassault Group’s Rafale combat jet emerged as the lowest bidder for the multi-billion contract for the Indian Air Force. The $10.4 billion deal is for supplying 126 medium multi-role combat aircraft to the Indian Air Force (‘IAF’). The order heralded Rafale’s entry into the export market.
Rafale’s entry into the export market is a major bad news for the beleaguered U.S. defense contractors who are looking offshore to compensate for the Pentagon’s planned axing of almost $1 trillion in budget cuts over the next decade. Although defense primes have mostly reported upbeat numbers for fiscal 2011, we are concerned about future growth in order backlogs from domestic programs.
Rafale emerged the winner beating five contenders and arch-rival Eurofighter Typhoon. Eurofighter Typhoon is a twin-engine, canard-delta wing, multi-role fighter. Eurofighter Typhoon was developed by a consortium of three companies – The European Aeronautic Defence and Space Company N.V., Alenia Aeronautica and BAE Systems.
U.S.defense goliaths Lockheed Martin Corporation’s (LMT - Analyst Report) F-16 Falcon and The Boeing Company’s (BA - Analyst Report) F-18 Hornet were also in the fray. The rest of the contenders were Russian Aircraft Corporation MiG’s MiG-35, and Swedish aerospace and defense company Saab AB’s Saab JAS 39 Gripen.
However, in November 2011, citing technical reasons the list was pared to two consisting of only Rafale and Eurofighter Typhoon. U.S. defense primes have now shifted their focus on a planned $5 billion purchase of fighter jets by Brazil.
The perplexity is writ large among the defense primes. For example, Boeing, in a conference call last week, pinned its top-line growth to overseas prospects. The company currently generates close to one-eighth of its topline from export sales which the company expects to increase to more than a fourth over the next few years.
Likewise, Lockheed Martin, the world’s largest stand alone defense company, is facing bottlenecks at the F-35 program. The F-35 is the Pentagon’s biggest weapons program, at an estimated cost of $382 billion for development and the purchase of planes.
Pentagon with constrained budgets is reducing and delaying future purchase of F-35 jets. Defense Secretary Leon Panetta is pushing for 13 fewer F-35 in the fiscal 2013 budget and 33 less in the fiscal 2014 budget.
Any downside on the F-35 program is a bad news for another defense biggie Northrop Grumman Corporation (NOC - Analyst Report) which has substantial exposure to the program on account of its role as a subcontractor. Apart from that prominent Northrop programs like the unmanned aerial vehicle Global Hawk program are increasingly coming under the scanner for potential targets for budget cuts.
L-3 Communications Holdings Inc. (LLL - Analyst Report) may also face margin headwinds going forward on account of two significant contract re-competition in its services business.
On the other hand Raytheon Company (RTN - Analyst Report) which generates more than a third of its top line from export sales is on a more solid footing from its wide exposure in focus areas like cybersecurity; missile defense; intelligence, surveillance and reconnaissance; and electronic warfare.
Overall, in the past week, the Defense & Aerospace firms (we monitor actively) with an average beta of 0.8% rose 0.3%, on average, outpacing the performance of the S&P500, which fell 0.2% over the same period.
The rise is a misnomer to the industry as Huntington rose solely on the premise of timely overhaul of the Lincoln Carrier ship. However, we are on the sidelines for the company owing to the fact that its performance is heavily tied to U.S. defense.
Also in the current uncertain economy, bonds and high dividend paying stocks come foremost in the minds of investors. However the average dividend yield of 2.1% for our actively tracked defense stocks is close to the S&P 500 yield which is currently at 2.2%.
Out of this prominent among them is Lockheed Martin with yield hovering close to the 5% mark. In contrast, the 10-year Treasury bond currently returns approximately 1.8%.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: https://at.zacks.com/?id=5515.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: https://at.zacks.com/?id=5517
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at https://at.zacks.com/?id=5518.
Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Zacks Investment Research
800-767-3771 ext. 9339