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US-India Set to Strike Defense Deal: Stocks to Watch

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Crucial defense agreements have been the highlight of President Donald Trump’s two-day state visit to India this week. The United States is expected to strike military deals worth $3 billion with the South Asian country on Feb 25, which would have the country’s top defense contractors contend for inclusion.

Investors keen to consider defense stocks could watch these companies from an investment perspective as they strive for fitting into the much-awaited U.S.-India defense agreements.

Let’s delve deeper.

Defense Stocks Look Forward to Indian Deals

India, the world’s fourth biggest defense spender, is setting the stage for a string of defense contracts that could set the ball rolling for American defense firms.

In fact, in the week ended Feb 22, the South Asian country’s cabinet cleared $2.6 billion worth of purchase from Lockheed Martin Corporation LMT to the Indian navy. The purchases include 24 multi-role MH-60R Seahawk maritime helicopters, which are equipped with Hellfire missiles as Times of India reported

The Lockheed Martin helicopters will be procured via foreign military sales from the U.S. government. Shares of Lockheed Martin have risen 37.1%, outperforming the S&P 500 Index’s rally of 18.6% over a year.

Northrop Grumman Corporation’s NOC joint venture with Lockheed Martin (LONGBOW Limited Liability Company) received a five-year sustainment indefinite delivery/indefinite quantity contract for up to $235.8 million to offer post-production support services for the AH-64 Apache helicopter AN/APG-78 LONGBOW Fire Control Radar to global customers.

This is crucial since the Indian Army is set to acquire six AH-64E Apache attack helicopters. Shares of Northrop Grumman have gained 25.2%, outperforming the S&P 500 Index’s gain of 18.5% over a year.

Per the U.S. Defense Security Cooperation Agency, earlier in February, the State Department also gave green signal to a possible sale to the country for $1.87 billion worth of arms and ammunitions. This deal comprises a Raytheon Company RTN Integrated Air Defense Weapon System, which includes radars and missiles. The deal also consists of Raytheon Stinger FIM-92L missiles, M4A1 rifles and communications equipment among other products.

Earlier this month, Raytheonand Lockheed Martin’s Javelin Joint Venture signed a memorandum of understanding with the Indian company Bharat Dynamics to co-produce the Javelin anti-tank missile system in the South Asian country. Shares of Raytheon have risen 18.9%, outperforming the S&P 500 Index’s gain of 16.5% over the past six months.

Of course, these aren’t the only military deals that defense firms are banking on. Boeing BA and Lockheed Martin continue to compete for a huge fighter jet deal worth $15 billion. The contract is to deliver 114 combat planes to the Indian Air Force (IAF). Lockheed Martin even offered to shift its F-16 production line to India from the United States. The company plans to build an enhanced version of its F-21 aircraft as Reuters stated.

In order to vie for Lockheed Martin’s bid to the IAF, Boeing offered its F/A-18 Super Hornet. Overseas defense companies, such as France’s Dassault, Sweden’s Saab and Russia's United Aircraft Corp. are other contenders for this massive deal.

Lockheed Martin, Northrop Grumman and Raytheon carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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