The Zacks Analyst Blog Highlights: Boeing, Textron, Lockheed Martin, Northrop Grumman and Ocwen Financial

Zacks

For Immediate Release
 
Chicago, IL – November 29, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Boeing Company (BA-Free Report), Textron Inc. (TXT-Free Report), Lockheed Martin Corp. (LMT-Free Report), Northrop Grumman Corp. (NOC-Free Report) and Ocwen Financial Corp. (OCN-Free Report).
 
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Here are highlights from Wednesday’s Analyst Blog:

More Defense Dept. Orders for Boeing
 
The Department of Defense (DoD) offered several contracts aggregating $263.4 million Tuesday. Of the contenders was The Boeing Company (BA-Free Report) which clinched two back-to-back contracts totaling $26.9 million.
 
The larger contract worth $18.1 million went to Bell-Boeing Joint Project Office, a collaborative venture between Textron Inc. (TXT-Free Report) and Boeing. This involves providing continued logistics services to the different versions of the V-22 Osprey tiltrotor aircraft operated by the U.S. Marine Corps, Air Force and Special Forces Operations Command.
 
Bell-Boeing’s V-22 Osprey tiltrotor aircraft includes the MV-22, the Marine Corps variant which offers greater maneuverability and can carry combat troops twice as fast and five times farther than previous helicopters. The CV-22 is the Air Force variant which delivers long-range vertical take-off and landing insertion and extraction capability as well as permits aerial refueling and world-wide self-deployment.
 
The contracting activity is the Naval Air Systems Command, Patuxent River, MD. The contract is expected to run through Jan 2014. The tasks relating to the contract will be carried out in Amarillo, Texas and Philadelphia, PA.
 
Boeing’s business wing Insitu Inc. secured the second contract valued at $8.8 million for the delivery of a single Low Rate Initial Production II RQ-21A "Blackjack" Unmanned Aircraft System, including air vehicles, ground control stations, launch and recovery equipment, and air vehicle support equipment to the U.S. Navy. The order is expected to be concluded by May 2014.
 
The 81-pound Blackjack is a small-sized unmanned aerial vehicle (:UAV) launched by catapult and has a flight endurance of over 13 hours. The aircraft is able to cover speeds of up to 90 knots. It is primarily a surveillance and reconnaissance drone.

Lately, Boeing has mostly secured low-priced contracts with the occasional high-value orders attributable to the ongoing sequestration in the U.S. The recent being a $325 million contract to offer "diverse and highly complex" systems engineering and integration services related to the country’s ballistic missile defense system.
 
Boeing’s diverse defense product offering has attracted significant attention from the Middle East, India and Australia. Foreign military sales contracts would to a large extent offset budget austerities in the U.S.
 
Currently, Boeing carries a Zacks Rank #2 (Buy). Other well-placed operators include Zacks Ranked #2 Lockheed Martin Corp. (LMT-Free Report) and Northrop Grumman Corp. (NOC-Free Report).
 
Ocwen Down to Underperform
 
On Nov 26, 2013, we downgraded our long-term recommendation on Ocwen Financial Corp. (OCN-Free Report) to Underperform from Neutral due to the company’s disappointing third-quarter 2013 results. Further, mounting expenses, regulatory pressures, market volatility and contraction in the subprime Mortgage Servicing Rights (:MSR) market remain concerns.
 
Why Downgrade?
 
Although Ocwen has been growing through acquisitions, this strategy has subjected the company to many obligations. The acquisitions have accrued one-time expenses for the company and increased its burden of losses – as incurred by the acquired companies – along with integration costs.
 
Further, sluggish recovery of the credit and capital markets will not be able to abate pressure on Ocwen’s bottom line in the near-to-medium term. Until the markets rebound and stability is regained, these factors will continue to adversely impact the company’s operations.
 
Ocwen has been witnessing speedy prepayment over the past few quarters. Though speedy prepayment pushes the float income, it eventually leads to lower revenues, higher amortization expenses and impairment charges related to the MSRs, which will impact the company’s financial position.
 
The Zacks Consensus Estimate for 2013 declined 36.5% to $2.24 per share over the last 30 days. Further, for 2014, the Zacks Consensus Estimate decreased 6.5% to $5.28 per share over the same time period. Due these revisions, Ocwen now carries a Zacks Rank #5 (Strong Sell).

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