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Defense Stock Roundup: BA, LMT Win Big Orders, AIR Beats on Q1 Earnings

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A hefty flow of big contracts from the Pentagon is likely to have boosted major defense contractors over the past week. Moreover, the back-to-back commercial aerospace outlook for primary markets released by Boeing must have also driven the bourses’ growth in the past week, with the aircraft giant being a notable member of the S&P 500 Index.

The major defense stock indices ended in the green in the trailing five trading sessions. The S&P 500 Aerospace & Defense (Industry) index rose 2.6%, while the Dow Jones U.S. Aerospace & Defense index grew 2.5% in the aforementioned time period.

Among the past week’s highlights, defense majors namely Boeing BA, Lockheed Martin LMT, Raytheon Technologies RTX, L3Harris Technologies LHX and Curtiss-Wright Corporation CW secured a number of notable deals from the Department of Defense’s daily funding session. Moreover, Boeing announced an encouraging outlook for China’s aviation industry while Lockheed announced a dividend hike.  AAR Corp. AIR released its first-quarter fiscal 2022 results.

Recap of Past Week’s Important Stories

1.    Boeing won a contract worth $3.46 billion for offering sustainment services for the C-17 Globemaster III jets. The deal was awarded by Air Force Life Cycle Management Center, Robins Air Force Base, GA.

The contract is expected to be completed by May 30, 2031. It involves Foreign Military Sales to the United Kingdom, Australia, Canada, NATO Airlift Management Program Office, India, Kuwait, United Arab Emirates, and Qatar (read more: Boeing Wins $3.5B C-17 Globemaster III Jet Support Deal).

The company clinched another contract worth $757 million for the production and delivery of 12 P-8A jets to Germany. The Naval Air Systems Command, Patuxent River, MD, awarded the deal.

The deal is expected to be completed in February 2025. The majority of the work related to this deal will be executed in Seattle, WA (read more: Boeing Wins $757M Deal to Supply P-8A Jets to Germany).

Moreover, Boeing released its projection for China’s aerospace market. The jet giant forecast that China’s airlines will require 8,700 new airplanes by 2040, valued at $1.47 trillion, to meet expanding commercial air travel demand.

Further, Boeing expects demand from China’s civil aviation industry to reach more than 400,000 new aviation personnel by 2040, including pilots, technicians and cabin crew. Boeing’s businesses, training, supply chain and other activities, and partnerships in China contribute more than $1.5 billion annually to the economy.

2.    Lockheed Martin’s business unit, Aeronautics, won a modification contract worth $1.1 billion for the production and delivery of 16 F-35 Lightning II aircraft. The Naval Air Systems Command, Patuxent River, MD, awarded the deal.

The contract is expected to get completed by May 2026. The majority of the work related to this deal will be executed in Fort Worth, TX (read more: Lockheed Wins $1.1B Deal to Supply 16 F-35 Aircraft).

Moreover, Lockheed announced that the board of directors approved a 7.7% increase in the quarterly dividend rate. The revised quarterly dividend will be $2.80, up from the previous rate of $2.60.

The board of directors approved a dividend increase this month, leading to a whopping 244.6% total increase in annualized dividend over the last decade (read more: Lockheed Rewards Shareholders With 7.7% Dividend Hike).

3.    Raytheon Technologies’ business unit, Pratt & Whitney, secured a contract worth $259 million to support sustainment efforts for F-35 aircraft. The contract has been awarded by the Naval Air Systems Command, Patuxent River, MD.

The contract is expected to conclude in September 2024. The majority of the work related to the contract will be executed in East Hartford, CT and Oklahoma City, OK (read more: Raytheon's  Pratt & Whitney Wins $259M Deal to Aid F-35).

4.    L3Harris Technologies won a production order worth $200 million for the U.S. Army’s HMS (Handheld, Manpack, & Small Form Fit) program. As part of the deal, L3Harris will provide advanced multi-channel, multi-mission communications tactical radio solutions to the U.S. Army, supporting their Integrated Tactical Network.

The order also comprises a five-year base for the Army’s Indefinite Delivery Indefinite Quantity contracts for the handheld Leader and manpack radios with an additional five-year option, and a ceiling of more than $16 billion (read more: L3Harris Technologies Wins $200M Deal for Tactical Radios).

5.    Curtiss-Wright received a $100-million defense order from Bechtel Plant Machinery, Inc. to supply  pumps for the U.S. Navy’s Virginia-class submarine, Columbia-class submarine and Ford-class aircraft carrier programs.

The new contract builds upon the previously awarded contracts to provide propulsion valves, pumps, and advanced instrumentation and control systems, valued in excess of $130 million, received in second-quarter 2021 (read more: Curtiss-Wright Gets Naval Order to Support U.S. Defense).

6.    AAR Corp.’s first-quarter fiscal 2022 adjusted earnings of 52 cents per share surpassed the Zacks Consensus Estimate by 6.1% and also improved a whopping 206% from the year-ago quarter. Its net sales worth $455.1 million outpaced the Zacks Consensus Estimate by 3.9% and  rose 14% from the year-ago quarter.

The company incurred interest expenses of $0.7 million in the fiscal first quarter compared with $1.6 million in the year-ago quarter.

As of Aug 31, 2021, AAR Corp.’s cash and cash equivalents amounted to $48.8 million compared with $51.8 million as of May 31, 2021 (read more: AAR Corp Q1 Earnings Beat Estimates, Sales Rise Y/Y).

Performance

Over the past five trading sessions, the defense biggies put up a solid show. Lockheed gained the most, with a 4.3% rise in its share price, followed by Northrop Grumman.

In the last six months, the industry's performance was mostly impressive, except that for Lockheed and Boeing. Textron TXT gained the most with a 34% surge in share price, followed by Northrop.

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

4.33%

-6.04%

BA

3.86%

-12.82%

GD

2.39%

8.23%

RTX

2.02%

11.79%

NOC

4.15%

12.33%

TXT

2.78

33.99%

LHX

0.13%

9.95%

 


 


 


 


 


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