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Defense Stock Roundup: NOC, HII Win Big Contracts, TDG Inks Acquisition Deal

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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 kept major defense contractors buoyant. However, the U.S. stock market ended the month of November on a disappointing note, after Reuters reported that the Trump administration is planning to blacklist leading China-based chipmaker SMIC as well as national offshore oil and gas producer, CNOOC Group. The move would limit their access to American investors and might spur tensions with China.

This might have marred growth of defense stocks and in turn caused major indices of the Aerospace-Defense space to end dismally over the trailing five trading sessions. The S&P 500 Aerospace & Defense (Industry) index lost 2.6%, while the Dow Jones U.S. Aerospace & Defense index slipped 1.6% in the aforementioned time period.

Among the past week’s highlights, defense majors namely Northrop Grumman NOC, Huntington Ingalls Industries HII, Lockheed Martin LMT and Raytheon Technologies RTX secured a number of notable deals from the Department of Defense’s daily funding session. Moreover, Transdigm Group TDG signed an acquisition deal worth $965 million.

Recap of Past Week’s Important Stories

1. Northrop Grumman’s business unit, Northrop Grumman Systems won a contract worth $4.8 billion to conduct development, modernization, retrofit and sustainment activities for the Global Hawk program. The deal has been awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH.

The  contract is expected to get completed by Sep 30, 2030.  Work related to the deal will be carried out in San Diego, CA (read more: Northrop Wins $4.8B Deal to Upgrade Global Hawk Program).
 

2. Huntington Ingalls’ Newport News Shipbuilding division clinched a $2.2-billion modification contract for supporting the construction of two Columbia-class ballistic missile submarines. The contract was awarded by General Dynamics' Electric Boat division. 

Per the deal terms, Huntington’s Newport News division will also conduct construction and delivery of six module sections for each of the first two Columbia-class submarines. The module deliveries are scheduled to start in November 2022, with the last module to be delivered by January 2028 (read more: Huntington's Unit Wins $2.2B Submarine Support Deal).
 

3. Lockheed Martin’s Aeronautics unit secured a $1.4-billion contract for providing aircraft sustainment support and services for the C-130J Super Hercules aircraft. The contract has been awarded by the Air Force Life Cycle Management Center, Robins Air Force Base, GA.

Per the deal terms, Lockheed Martin will provide program management support, spares, supply support services, support equipment, diminishing manufacturing sources, sustaining engineering services, alongside other associated support and services (read more: Lockheed Martin Wins $1.4B Deal to Support C-130J Jets).
 

4. Raytheon Technologies’ Pratt and Whitney Military Engines unit recently clinched a contract worth $642 million for procuring performance-based logistics activities to support the F-135 propulsion system. The deal has been awarded by the Naval Air Systems Command, Patuxent River, MD.

The contract is projected to be completed by November 2021. The majority of the work related to the deal will be carried out in East Hartford, CT (read more: Raytheon Wins $642M Deal to Support F-135 Program).
 

5. TransDigm Group signed an agreement to acquire Cobham Aero Connectivity for approximately $965 million in cash, including tax benefits.  The acquisition, subject to regulatory approvals and customary closing conditions, is expected to close during the first quarter of 2021.

Alongside the agreement, TransDigm Group announced the potential divestiture of a select number of defense-oriented operating units, which were acquired in March 2019 as part of the Esterline acquisition (read more: TransDigm to Acquire Cobham Aero Connectivity for $965M).

Performance

Over the past five trading sessions, the defense biggies put up a dismal show. Lockheed lost the most, with its shares having declined 3.6% followed by Raytheon Technologies.

In the last six months, the industry's performance was mostly impressive, except that for L3Harris LHX and Lockheed Martin. Boeing BA gained the most with 40.7% surge in share price, followed by Textron.

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

-3.63%

-6.16%

BA

-0.03%

40.70%

GD

-0.29%

16.09%

RTX

-3.49%

6.21%

NOC

-1.53%

7.85%

TXT

-3.16%

30.82%

LHX

-0.65%

-2.11%

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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
 
The Boeing Company (BA) : Free Stock Analysis Report
 
Transdigm Group Incorporated (TDG) : Free Stock Analysis Report
 
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
 
L3Harris Technologies Inc (LHX) : Free Stock Analysis Report
 
Raytheon Technologies Corporation (RTX) : Free Stock Analysis Report
 
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