Raytheon, Boeing, Lockheed Win DoD Contracts

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With the passage of Obama's $1.1 trillion Omnibus spending measure in Jan 2014, Pentagon seems to be back strengthening its artillery. The U.S. Department of Defense (DoD) granted a total of eight contracts on Apr 9, 2014.

Among the winners, Exelis Inc. (XLS), General Dynamics Corp. (GD), Harris Corp. (HRS) and Thales Defense & Security together won a $988 million contract for SRW Appliqué Radio Systems.

Again, Pentagon provided funds to Thales-Raytheon Systems Company LLC for using the option to acquire Sentinel Mode 5 Identification Friend or Foe kits and spares. The contract is worth $17.7 million and is slated for completion on Sep 30, 2016. Thales-Raytheon Systems Company is a 50:50 joint venture between Raytheon Co. (RTN) and Thales Group.

Separately, Raytheon’s Integrated Defense Systems division has also been awarded a $17.0 million firm-fixed-price delivery contract. The contract was for the procurement and fabrication of AN/SPY-1 Radar Transmitter Multi-Mission Signal Processor Capability ordnance alteration kits, RF Coherent Combiner ordnance alteration kits, Kill Assessment System ordnance alteration kits, High Volt Power Supply Sidewall Capacitor ordnance alteration kits, 10 kW Traveling Wave Tube monitoring circuit ordnance alteration kits, Aegis Weapon System Modernization requirements for Japan, and installation and test services in support of the AEGIS modernization effort. Work will likely be completed by Apr 2016.

Defense major, The Boeing Co. (BA) also received an $8.9 million modification contract from the defense department for a CH-47F cargo helicopter. The contract – expected to be completed by Dec 31, 2020 – calls for Boeing to provide additional production lot 13 long lead funding and additional production lot 12 over and above funding.

Pentagon’s prime contractor, Lockheed Martin Corp. (LMT), also did not fail to collect funds from the daily funding list of the DoD. Though a small award, the company received an $8.5 million modification contract for securing options for Low Cost Conformal Array production units, spare modules and spare outboard electronics canisters. Work on this contract is expected to be completed by Feb 2016.

Though the aerospace and defense industry is vulnerable to defense budget cuts and sequestration, the defense companies have diversified their businesses and are not lacking in DoD contracts.

Apart from small pickups from DoD contracts, these companies are also clinching deals of higher value. Recently, Boeing won a sizeable $1.16 billion contract modification to supply the U.S. Army with AH-64E Apache helicopters.

Raytheon and General Dynamics stocks, with a Zacks Rank #2 (Buy), are worth accumulating now.

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