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Defense Stock Roundup: LMT Wins Big Deal, AIR Posts Better-Than-Expected Q2 Results

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A generous flow of funds from the Pentagon kept U.S. defense stocks buoyant over the past five days. Evidently, major indices of the aerospace and defense industry put up a healthy show. Notably, the S&P 500 Aerospace & Defense (Industry) Index rose 1%, while the Dow Jones U.S. Aerospace & Defense Index went up 0.9% in the past five trading sessions.

Among past week’s highlights, defense majors namely Lockheed Martin Corp. (LMT - Free Report) , Raytheon Company , Northrop Grumman Corp. (NOC - Free Report) and The Boeing Company (BA - Free Report) secured a number of notable deals from the Department of Defense’s daily funding session. Meanwhile, AAR Corp. (AIR - Free Report) released second-quarter fiscal 2020 results.

Recap of Past Week’s Important Stories

1.    Lockheed Martin’s Aeronautics segment secured a $7-billion modification contract for providing F-22 Raptor sustainment. The modification contract further includes an option for additional five-year ordering for comprehensive F-22 air vehicle sustainment.

Work related to the deal will be executed in five operational bases located in Alaska, Nevada, Florida, Virginia and Hawaii. It is scheduled to get completed by Dec 31, 2032 (read more: Lockheed Martin Wins $7B Deal for F-22 Raptor Sustainment).

2.    Raytheon’s Missile Systems (MS) business division recently secured a $1 billion contract to meet full-rate production requirements, spares and round design agent for Standard missile SM-6.

The majority of work related to the deal will be executed in East Camden, AR, Huntsville, AL and Wolverhampton, United Kingdom. The project is expected to be completed by October 2026. (read more: Raytheon Wins $1B Deal to Aid Standard Missile-6 System).

3.    Northrop Grumman’s business subsidiary, Northrop Grumman Systems Corp., won a $1-billion contract for the production of Active Electronically Scanned Array (AESA) radars.  The modification contract was awarded by the Air Force Life Cycle Management Center, Fighter Bomber Directorate, F-16 Division, Wright Patterson Air Force Base, OH.

Work related to the deal will be performed at Linthicum Heights, MD, and is expected to get completed by May 2027. (read more: Northrop Grumman Secures $1B Deal to Support F-16 Aircraft).

Moreover, the business unit secured a contract worth $251.6 million to provide ground stations, trade studies, tooling and associated support equipment in relation to production of MQ-4C Triton unmanned aircraft.

Work related to the contract is scheduled to be completed by February 2023. The majority of the work related to the deal will be carried out in San Diego and Palmdale, CA as well as Red Oak, TX (read more: Northrop Grumman Wins $252M Deal to Support Triton UAS).

4.    Boeing clinched a $400-million modification contract for providing recurring and non-recurring engineering services to B-1 and B-52 aircraft. The contract was awarded by Air Force Life Cycle Management, Tinker Air Force Base, Oklahoma City, OK.

Work related to the deal will be performed at Tinker Air Force Base, OK, Edwards Air Force Base, CA, Barksdale Air Force Base, LA and Oklahoma City, OK. The entire task is expected to get completed by Dec 31, 2020 (read more: Boeing Wins Deal to Offer Engineering Service to Bomber Jets).  

5.    AAR Corp. reported second-quarter fiscal 2020 adjusted earnings of 64 cents per share, which surpassed the Zacks Consensus Estimate of 61 cents by 4.9%. The figure also reflected an improvement of 6.7% from 60 cents reported in the year-ago quarter.

In the reported quarter, net sales of $560.9 million exceeded the Zacks Consensus Estimate of $529 million by 6%. The top line also increased 13.7% from $493.3 million in the year-ago quarter.

As of Nov 30, 2019, AAR Corp’s cash and cash equivalents amounted to $38.2 million compared with $21.3 million as of May 31, 2019. The company reaffirmed its financial guidance for fiscal 2020 (read more: AAR Corp Beats on Q2 Earnings, Raises Fiscal 2020 View).

Performance

Over the past five trading sessions, defense biggies mostly put up a solid show. Raytheon gained the most, with its share price increasing 3.2%, followed by Leidos Holdings, shares of which rose 3%.

The performance of industry players over the last six months was mostly impressive, except that of Boeing, General Dynamics and Textron. This time Leidos Holdings gained the most, with its share price increasing 25.5%.

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
LMT2.36%9.12%
BA-0.23%-12.01%
GD-0.15%-0.40%
RTN3.20%23.67%
NOC2.73%9.18%
LDOS2.98%25.50%
TXT2.81%-12.34%
LHX1.97%5.43%

 

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