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Defense Stock Roundup: US-Iran Conflict Intensifies, LMT & RTN Win Big Deals

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U.S. defense stocks have been witnessing an upside the past couple of trading sessions, following escalated cross-border tensions between the United States and Iran. The latest airstrike at Baghdad airport that killed Iran’s top general Qasem Soleimani has been the primary catalyst behind the fresh tiff between these two nations. Iran has vowed to take revenge, which intensified possibilities of a war with the United States.

This along with a generous flow of funds from the Pentagon bolstered U.S. defense stocks over the past five trading sessions. Evidently, major indices of the aerospace and defense industry put up a healthy show. Notably, the S&P 500 Aerospace & Defense (Industry) Index rose 3.7%, while the Dow Jones U.S. Aerospace & Defense Index went up 3.6% in the past five trading sessions.

Among past week’s highlights, defense majors namely Lockheed Martin Corp. (LMT - Free Report) , Raytheon Company (RTN - Free Report) and General Dynamics Corp. (GD - Free Report) secured a number of notable deals from the Department of Defense’s daily funding session. Meanwhile, Curtiss-Wright (CW - Free Report) made a meaningful acquisition.

Recap of Past Week’s Important Stories

1.    Lockheed Martin’s Aeronautics business division secured a $1.93-billion reimbursable contract in relation to the F-35 Lightning II Joint Strike Fighter Air Systems.

Per the deal terms, Lockheed Martin will provide a consortium of services, which include ground maintenance activities, depot-activation activities, automatic logistics information system operations and maintenance, health management implementation and support, supply-chain management, along with others.

Work related to the deal is expected to conclude by December 2020 (read more: Lockheed Martin Wins $1.93B Deal for F-35 Program).

Its Aeronautics business won another contract to offer long lead materials, parts components and effort for the production of 28 F-35 aircraft of the 15th lot. Valued at $172 million, the contract is expected to be completed by November 2023 and will cater to U.S. Navy and Marine Corps (read more: Lockheed Clinches $172M Deal to Support F-35 Program).

Meanwhile the company’s Rotary and Mission Systems (RMS) unit clinched a $138.5-million modification contract in relation to the AEGIS Combat System Engineering Agent (CSEA). Per the deal, the company will be responsible for the development, integration, test and delivery of the AEGIS Advanced Capability Build (ACB) 20 integrated combat system.

Work related to this deal will be performed in Moorestown, NJ and is expected to be completed by December 2020 (read more: Lockheed Martin Wins $138M Navy Deal to Support AEGIS CSEA).

2.    Raytheon’s business unit Missile Systems (MS) unit secured a $768.3 million contract to manufacture advanced medium range air to air missile (AMRAAM). Work related to the deal will be executed in Tucson, AZ.

Apart from production of these missiles, the MS unit will offer captive air training missiles, guidance sections, AMRAAM telemetry system, spares and other production engineering support hardware (read more: Raytheon Wins $758M Deal to Produce AMRAAM Weapon System).

3.    General Dynamics’ business subsidiary, National Steel and Shipbuilding Co. (NASSCO) won a $98-million contract to execute docking phased maintenance availability for fiscal 2020.

Per the terms, General Dynamics’ NASSCO unit will maintain, modernize and repair USS Harpers Ferry (LSD 49) and also provide the required facilities and human resources for the completion of the work. Work related to the deal is expected to be completed by December 2020 (read more: General Dynamics' NASSCO Wins $98M Deal to Support USS LSD 49).

4.    Curtiss-Wright completed the takeover of 901D Holdings, which manufactures mission-critical integrated electronic systems, subsystems and ruggedized shipboard enclosure solutions.  Valued at $132 million of cash, the acquisition has expanded the breadth of Curtiss-Wright’s instrumentation and controls systems technologies and increasedits footprint on critical U.S. Navy shipbuilding programs.

The deal has combined 901D’s proven track record and Curtiss-Wright’s state-of-the-art electronic systems and software capabilities, which, in turn, will allow the acquirer to provide shipboard solutions on both nuclear and non-nuclear powered vessels.

Performance

Over the past five trading sessions, defense biggies put up a solid show. Northrop gained the most, with its share price increasing 8.5%, followed by Lockheed, shares of which rose 5. 3%.

The performance of industry players over the last six months was mostly impressive, except that of Boeing, General Dynamics and Textron. This time Raytheon gained the most, with its share price increasing 31%.

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
LMT5.26%11.68%
BA1.09%-6.22%
GD2.59%-0.10%
RTN2.97%31.03%
NOC8.48%15.57%
LDOS2.17%22.36%
TXT0.95%-15.75%
LHX4.96%14.47%

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