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Defense Stock Roundup: LMT, NOC Win Big Contracts, AIR Beats on Q3 Earnings

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Aparajita Dutta
·5-min read
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Over the past week, a generous flow of contracts from the Pentagon is likely to have boosted major U.S. defense contractors’ share price performance. The buoyant broader market also offered stimulus to the industry, with investors expecting favorable outcome from President Biden’s soon-to-be-released infrastructure plan.  

Consequently, we witnessed major indices of the Aerospace-Defense space ending in green over the trailing five trading sessions. The S&P 500 Aerospace & Defense (Industry) index gained 1.4%, while the Dow Jones U.S. Aerospace & Defense index rose 2.4% in the aforementioned time period.

Among the past week’s highlights, defense majors namely Lockheed Martin LMT, Northrop Grumman NOC, General Dynamics GD, Huntington Ingalls Industries HII and Raytheon Technologies RTX secured a number of notable deals from the Department of Defense’s daily funding session. Moreover, AAR Corp. AIR released its fiscal third quarter results.

Recap of Past Week’s Important Stories

1.    Lockheed Martin and Northrop Grumman acquired two separate contracts for designing the next-generation interceptor for the U.S. missile defense network. The Missile Defense Agency also made an announcement of spending a combined $1.6 billion, at most, on both contractors through fiscal-year 2022.

The next-generation interceptor warheads would be part of the Ground-based Midcourse Defence (GMD) system. The Lockheed Martin deal from the Pentagon could be valued at as much as $3.7 billion, while the Northrop Grumman contract could be valued at up to $3.9 billion (Read more: Lockheed and Northrop Win $7.6B Missile Contracts).

Lockheed’s Missiles and Fire Control (MFC) business segment secured a Foreign Military Sales (FMS) contract worth $2.77 billion for delivering rocket pods for Guided Multiple Launch Rocket Systems (GMLRS) alternative warhead. Work related to the deal is scheduled to be completed by Oct 31, 2024.

The contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL (Read More: Lockheed Martin Secures $2.8B Deal for GMLRS Support).

2.    General Dynamics’ Electric Boat division clinched a $2.42 billion worth modification contract to exercise an option for the construction of one Block V Virginia-class submarine with Virginia Payload Module (VPM). The deal was awarded by The Naval Sea Systems Command, Washington, DC.

The contract is expected to be completed by February 2030 (Read More: General Dynamics Wins Deal to Build Submarine With VPM).

3.    Raytheon Technologies’ Missiles and Defense segment won a contract worth $518.4 million for the production of the 34th lot of Advanced Medium Range Air-to-Air Missile (AMRAAM).

The contract has been awarded by the Air Force Life Cycle Management Center, Eglin Air Force Base, FL. Work related to the deal will be executed in Tucson, AZ, and is scheduled to be completed by Dec 31, 2023 (Read More: Raytheon Wins $518M Deal to Manufacture AMRAAM Systems).

4.    Huntington Ingalls’ Newport News segment has secured a modification contract worth $194.5 million for continued execution of engineered overhaul for the fiscal 2018 USS Columbus (SSN 762), a nuclear-powered attack submarine. Work related to the deal will be performed in Newport News, VA, and is expected to be completed by November 2022.

The contract has been awarded by the Naval Sea Systems Command, Washington, D.C. (Read More: Huntington Ingalls Wins $195M Deal for SSN 762 Submarine).

5.    AAR Corp.’s third-quarter fiscal 2021 adjusted earnings of 37 cents per share surpassed the Zacks Consensus Estimate by 19.4% but declined 44.8% year over year. Its net sales totaled $410.3 million, which missed the Zacks Consensus Estimate by 0.7% and plunged 25.8% year over year.

The company’s cost of sales in the reported quarter fell 33.5% year over year to $324.3 million.

As of Feb 28, 2021, AAR Corp.’s cash and cash equivalents amounted to $99.2 million compared with $404.7 million as of May 31, 2020 (Read More: AAR Corp. Q3 Earnings Beat Estimates, Sales Fall Y/Y).

Performance

Over the past five trading sessions, the defense biggies put up a solid show. Textron TXT gained the most, with its shares up 6.7%, followed by Boeing BA.

In the last six months, the industry's performance was also mostly impressive, except that for Lockheed Martin. This time also Textron gained the most with 55.4% surge in its share price, followed by Boeing.

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

Company

Past Week

Last 6 Months

LMT

3.76%

-3.60%

BA

6.47%

54.13%

GD

2.91%

31.16%

RTX

2.28%

34.29%

NOC

2.41%

2.58%

TXT

6.68%

55.39%

LHX

3.43%

19.34%

 

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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
 
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General Dynamics Corporation (GD) : Free Stock Analysis Report
 
AAR Corp. (AIR) : Free Stock Analysis Report
 
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Textron Inc. (TXT) : Free Stock Analysis Report
 
Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
 
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