Defense Stock Roundup: Marine Helicopter to Support H-60; Pratt & Whitney to Renew Air Force Engines - Analyst Blog
Investors remained quite bearish in the last five trading days despite a number of orders coming in from the U.S. Navy. Marine Helicopter Support Co. nabbed a substantial follow-on naval contract to continue supporting H-60 helicopters. Moreover, the Navy placed an order for one E-2D radar and maritime patrol aircraft to Northrop Grumman Corp. NOC.
The importance of missiles cannot be overemphasized in a world torn by terrorism. Raytheon Co. RTN will supply the Tomahawk Land Attack Missile to the U.S. Navy to contend with the ever-changing theatre of the war.
(Read Defense Stock Roundup for Feb 24, 2015 for a recap.)
Recap of the Week’s Most Important Stories
1. A joint venture between Lockheed Martin Corp. LMT and Sikorsky Aircraft − Marine Helicopter Support Co. or MHSCo. − was landed with a nearly $2 billion follow-on contract from the Navy to continue providing support to more than 500 naval H-60 helicopters. This extends MHSCo’s performance-based logistics contract with the Navy through Jan 31, 2020. MHSCo would continue to repair, overhaul, modify and procure 1,710 airframe and avionics repairable components for the H-60 series aircraft (read more: Lockheed-Sikorsky JV Wins $2B H-60 Aircraft Support Deal).
2. United Technologies Corp. UTX subsidiary − Pratt & Whitney − secured a potential $407 million contract to support the U.S. Air Force‘s aircraft engine component modernization efforts. Pratt & Whitney will redesign, analyze, test and manage engines for military service. The work is slated for completion by Dec 31, 2021 and will be carried out at East Hartford, CT. The Air Force has allocated $5 million for the first task order from fiscal 2015 research, development, testing and evaluation funds.
3. Northrop Grumman received a $148.3 million contract from the U.S. Navy – a modification to the initial E-2D Advanced Hawkeye multi-year contract. The contract is for obtaining one E-2D Full-Rate Production Advanced Hawkeye aircraft. The fourth version of the E-2 Hawkeye aircraft helps provide 360-degree surveillance at all times. The proposed FY16 defense budget sought funding for five E-2D jets, emphasizing intelligence, surveillance and reconnaissance (“ISR”) activities in the light of rising security threats (read more: Northrop Wins $148.3M E-2D Hawkeye Modification Contract).
4. The Missile Defense Agency (“MDA”) awarded a contract valued at $129 million to Lockheed Martin for continued support of MDA’s global system for integrating the often disparate elements of missile defense. This contract, which is a modification to a previously awarded contract in Dec 2011, covers continued engineering, development, test, integration, fielding and on-site operations and sustainment support for the Command and Control, Battle Management and Communications (“C2BMC”) system.
The latest modification will run through Jan 2018 taking the total value of Lockheed Martin’s C2BMC contract to $1.2 billion.
5. Raytheon Co. will build 114 Tomahawk Block IV long-range cruise missiles for the U.S. Navy under a $122.4 million contract announced last Thursday. This modification to the previously awarded firm-fixed-price contract calls for Raytheon Missile Systems to build advanced surface ship- and submarine-launched cruise missiles. The contract is expected to be completed by Aug 2017.
Performance
Overall, the defense stocks remained bearish during the last five trading sessions with Textron losing the most, followed by Northrop Grumman. Raytheon however ended in a green spot. The picture is more reassuring in the past six months with no losses being noticed. Northrop Grumman tops the list, followed by Boeing.
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
Last Week
Last 6 months
LMT
-1.74%
+17.01%
BA
-0.38%
+22.12%
GD
-1.33%
+11.90%
RTN
+0.24%
+14.29%
NOC
-1.82%
+30.62%
COL
-0.77%
+18.23%
TXT
-1.96%
+16.89%
LLL
-0.89%
+19.16%
What’s Next in the Defense World?
L-3 Communications Holdings Inc. LLL will attend the J.P. Morgan Aviation, Transportation & Industrials Conference on Mar 3, 2015 and discuss its current business environment and financial outlook.
Rockwell Collins Inc. COL will also address the said conference on Mar 4.
The Boeing Co. BA will be at JPMorgan Aviation Transportation and Industrials Conference on Mar 5.
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NORTHROP GRUMMN (NOC): Free Stock Analysis Report
BOEING CO (BA): Free Stock Analysis Report
ROCKWELL COLLIN (COL): Free Stock Analysis Report
RAYTHEON CO (RTN): Free Stock Analysis Report
L-3 COMM HLDGS (LLL): Free Stock Analysis Report
UTD TECHS CORP (UTX): Free Stock Analysis Report
LOCKHEED MARTIN (LMT): Free Stock Analysis Report
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