Defense Stock Roundup: LMT Wins Big Order, BA Reveals Solid 10-Year Market View
Over the past week, a generous flow of contracts from the Pentagon is likely to have kept major defense contractors buoyant. Moreover, an impressive long-term outlook for the commercial aerospace market released by the aircraft giant, Boeing, must have also added impetus to the aerospace-defense industry’s growth.
Consequently, major defense stock indices ended in the green in the trailing five trading sessions. The S&P 500 Aerospace & Defense (Industry) index inched up 1%, while the Dow Jones U.S. Aerospace & Defense index rose 1.2% in the aforementioned time period.
Among the past week’s highlights, defense majors namely Lockheed Martin LMT, Raytheon Technologies RTX, Boeing BA, and Curtiss-Wright CW secured a number of notable deals from the Department of Defense’s daily funding session. Moreover, Boeing announced an encouraging outlook for global as well as European aviation industries.
Recap of Past Week’s Important Stories
1. Lockheed Martin clinched annualized contracts for fiscal years 2021-2023, involving the sustainment of its global F-35 fleet, from the F-35 Joint Program Office. Successful completion of these contracts will result in further reduction in overall operations and support costs for the F-35 program.
Per Reuters, these contracts are valued at a huge $6.6 billion. Per the terms, Lockheed will support operations and sustainment of its global F-35 fleet. The contract also requires the company to build enterprise capacity for supporting the future fleet of more than 3,000 F-35 jets (read more: Lockheed Wins $6.6B Deal for Sustainment of F-35 Jets).
2. Boeing won a contract worth $1.62 billion involving the Minuteman III Intercontinental Ballistic Missile (ICBM). The Air Force Nuclear Weapons Center, Hill Air Force Base, UT has awarded the agreement. The contract is projected to be completed by Sep 27, 2039. Per the terms, Boeing will conduct repair of the ICBM guidance set.
Work related to this deal will be carried out in Newark, OH (read more: Boeing Wins $1.6B Deal to Repair Minuteman III ICBM).
In its latest long-term outlook for the global aircraft market, Boeing projects opportunities worth $9 trillion over the next decade. This reflects a solid 5.9% improvement over the prior long-term outlook made by America’s largest jet maker in 2020.
Boeing forecasts global demand for new commercial planes to reach 19,000 by 2030, indicating an improvement of 3.5% from 2020’s figure. Market opportunities for commercial jets are now projected to be worth $3.2 billion over the next decade, which reflects a solid 10.3% hike over the prior 10-year forecast. Through 2040, Boeing projects commercial jet demand to be more than 43,500 new airplanes, reflecting an increase of about 500 planes from last year's forecast (read more: Boeing Upgrades Long-Term Jet Market Outlook: Stocks to Gain).
Boeing also revealed its outlook for the European aviation market. Per this report, 3.1% growth is forecast for annual air passenger traffic in Europe through 2040.
Per the recent report, European airlines are estimated to acquire more than 8,705 new jets valued at approximately $1.5 trillion over the next 20 years. This implies an improvement of 36.4% over $1.1 trillion worth 20-year market opportunities forecast earlier by Boeing (read more: Jet Stocks to Gain as Boeing Expects Rise in Europe Air Traffic).
3. Raytheon’s business segment, Collins Aerospace, secured a modification contract worth $294 million, under which it will procure 8,085 AN/ARC-210(v) radios. The Naval Air Warfare Center Aircraft Division, Patuxent River, MD has awarded the agreement.
The contract is projected to be completed in September 2024. Per the terms, the aforementioned radios will be installed in more than 400 strategic and tactical airborne, seaborne, and land-based (mobile and fixed) platforms (read more: Raytheon Wins $294M Deal for Communications Radios).
The company also won a modification contract worth $140 million for supplying 36 AN/APG-79(V)4 radar systems to support radar integration into the C/F-18A aircraft. The Naval Air Systems Command, Patuxent River, MD awarded this agreement.
The contract is expected to be completed in March 2024 and will serve the government of Canada. The majority of the work related to this deal will be executed in Forest, MS, and El Segundo, CA (read more: Raytheon Wins $140M Deal to Supply AN/APG-79 Radars).
4. Curtiss-Wright secured a $100-million contract 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 company will be performing this contracted work at its Cheswick, PA facility (read more: Curtiss-Wright Gets Naval Order to Support U.S. Defense).
Performance
Over the past five trading sessions, the defense biggies put up a mixed show. While Lockheed, Boeing gained, General Dynamics and Textron’s shares lost.
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 24.5% surge in share price, followed by L3Harris Technologies.
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 | 0.24% | -4.45% |
BA | 1.29% | -17.00% |
GD | -2.38% | 9.74% |
RTX | 0.47% | 8.05% |
NOC | -2.03% | 10.92% |
TXT | -1.14% | 24.49% |
LHX | -2.61% | 12.47% |
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