Though trading has been slightly volatile on the defense front over the last week a number of important announcements made quite a buzz.
United Launch Alliance or ULA – a Boeing BA and Lockheed Martin LMT joint venture − was in the limelight as it pulled the curtains on a rocket that could end U.S. dependency on Russia. Among other important updates, Boeing acquired 2d3 Sensing to further boost its intelligence, surveillance and reconnaissance or ISR initiatives. Rockwell Collins COL secured a big ticket program for technological upgrades on several helicopters.
(Read Defense Stock Roundup for Apr 7, 2015 here.)
Recap of the Week’s Most Important Stories
1. ULA unveiled plans yesterday for an all-new rocket equipped with reusable engines that may cut satellite-launch costs as well as find applications in numerous commercial space ventures. The ULA CEO Tory Bruno said that this will be accomplished mostly through the Sensible, Modular, Autonomous Return Technology initiative.
The reusable rocket, by popular vote named Vulcan, is slated to take off in 2019. The success of this project will likely end two challenges confronting ULA. Firstly, competition is intense with the Elon Musk run company Space Exploration Technologies Corp. or SpaceX focusing hard on the reusability of rockets. It would also be an answer to the growing pressure from the Congress to phase out U.S. dependence on Russian-built rocket engines.
The plan mainly involves using helicopters to salvage the engines as they detach in midair after launch. These will then be recertified and reused in subsequent launches. ULA contends that this recovering and recycling of engines is one of the simplest ways to slash launch costs. The cost of the latest mission will be between $100 million and $200 million apiece. The company also has plans to outline a new pricing system for space cargo in the summer.
2. Rockwell Collins Inc. won a sizable contract from the U.S. Army for technological upgrades on several helicopters. The contract calls for Rockwell Collins to provide software and system development as well as integration onto helicopters comprising CH-47 Chinook, MH-47, MH-6, MH/UH/HH/VH-60, VH-3, MH-65 and all their variants (read more: Rockwell Collins Seals $495 Million U.S. Army Contract).
3. The U.S. Department of Defense awarded Sikorsky Aircraft Corp., a unit of United Technologies Corp. UTX, a contract worth up to $480 million for providing spare parts that will be used in a number of weapon system platforms by the U.S. Army, Navy, Air Force and Marine Corps. The sole-source, firm-fixed price contract covers spare parts in various weapon system platforms, including Sikorsky’s H-53 and H-60 helicopters.
The award is for five years and includes a five-year option. It was landed as a sole source acquisition. The project has a performance completion date of Jun 30, 2020.
Another operating unit of United Technologies − UTC Aerospace Systems − recently inked an agreement with the U.S. Naval Undersea Warfare Center for an undisclosed amount. The five-year indefinite delivery/indefinite quantity contract entails its Engineered Polymer Products team in Jacksonville, FL to provide high frequency acoustic windows for the submarines of the U.S. Navy til 2020 (read more: UTC Aerospace's Submarine Acoustic Windows for US Navy).
4. Boeing acquired a wholly owned subsidiary of U.K. based OMG plc − 2d3 Sensing − that specializes in motion imagery processing of critical ISR data generated from aerial platforms. The software and services of 2d3 are generally used by the Air Force and other government and commercial customers. The transaction is valued at $25 million in cash.
This acquisition will enable Boeing to further integrate 2d3’s video analysis and other capabilities into Insitu and other Boeing platforms. The newly acquired business will be a part of Boeing’s Insitu Inc. subsidiary, which designs unmanned aircraft systems.
5. Boeing also won a $173.5 million Defense Logistics Agency contract for a number of aircraft control surface depot level repairable spare parts. The estimated value of the contract was determined by the expected demand quantities during its duration, which is four years.
The work is slated to be conducted in Missouri with an expected completion date of Apr 30, 2019.
Performance
The defense sector showed a mixed response over the past five trading sessions with few contractors ending in the red. The exceptions were Boeing, General Dynamics, Northrop Grumman and Rockwell Collins. Lockheed Martin lost the most, followed by L-3 Communications Holdings Inc. LLL. However, the past six-month scenario is not so bad with none of the defense majors closing in the red. Textron maintained its top spot, followed by Northrop Grumman.
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 |
-1.55% |
+15.74% |
|
BA |
+0.60% |
+28.75% |
|
GD |
+0.34% |
+15.05% |
|
RTN |
-0.10% |
+17.11% |
|
NOC |
+0.41% |
+35.90% |
|
COL |
+1.66% |
+34.47% |
|
TXT |
-0.11% |
+41.77% |
|
LLL |
-0.63% |
+15.19% |
What’s Next in the Defense World?
Lockheed Martin is scheduled to report its first quarter 2015 results on Apr 21, 2015.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment