In an otherwise quiet week for the defense sector, Boeing BA announced that it has acquired a German software firm to boost European sales. The company’s vice president for cargo helicopters also revealed that the company is likely to see increased demand for CH-47F Chinook helicopters from foreign countries through 2022.
L3 Communications Holdings Inc.’s LLL Link Simulation & Training business has been shortlisted to compete for the U.S. Air Force Training Systems Acquisition III contract.
Meanwhile, we’re into yet another earnings season, with 24 S&P 500 members having already reported their results. We expect the defense space to be abuzz with releases in the coming weeks.
(Read Defense Stock Roundup for Oct 6, 2015 here.)
Recap of the Week’s Most Important Stories
1. Boeing announced the purchase of Peters Software GmbH, a German company that provides pilot training software based on the standards of the European Aviation Safety Agency (EASA).
With this acquisition, Cologne, Germany-based Peters Software and its team of 20 full-time employees joined Boeing. Though Peters Software is a small firm, the expertise it has is vital for Boeing to make a relatively rare purchase.
Pilot training is a major business for Boeing, which operates 17 training centers around the world. Demand for Boeing’s commercial airplanes is on the rise due to a steady improvement in passenger and freight traffic on the back of a recovering global economy. The purchase will not only contribute to Boeing’s ability to sell aircraft in the European market but also help the company to better train pilots for those aircraft (read more: Boeing Takes Over Leading Pilot Training Software Company).
2. In a separate development, Boeing's vice president for cargo helicopters, Steve Parker, told Reuters that the company expects to sell 150 additional CH-47F Chinook helicopters to foreign countries through 2022. The buyers will mainly come from Europe, the Middle East and Africa and also include more orders from new countries. Parker said that news about additional foreign orders could surface before the end of 2015. This will be through direct commercial sales as well as foreign military sales.
3. L3 Communications Holdings Inc.’s Link Simulation & Training (“L-3 Link”) business has been shortlisted to compete for the U.S. Air Force (“USAF”) Training Systems Acquisition (“TSA”) III contract, which has a cumulative potential value of $20.9 billion. Apart from L-3 Communications, 11 large contractors were selected to compete for future TSA III task orders over the next 10 years (read more: L-3 Shortlisted to Compete for U.S. Air Force TSA III Contract).
4. Sikorsky Aircraft Corp., a subsidiary of United Technologies Corp. UTX, won a contract from the U.S. Department of Defense (DoD) for repair work on six weapons replaceable assemblies to be used on the CH-53 and MH-53 helicopters under a $191.5 million firm-fixed-price, sole-source contract from the U.S. Navy.
5. Soon after receiving a tank ammunition order last week, Orbital ATK, Inc. OA announced winning another domestic and international ammunition contract valued at $105 million.
The medium- and large-caliber ammunition order will be used for multiple U.S. and allied services for air, sea and land weapons platforms. The order includes a range of 20, 25 and 30mm tactical and target practice ammunition, as well as the 120mm tactical and training ammunition for the Abrams Main Battle Tank.
Orbital ATK received these contracts through the U.S. Army Project Manager Maneuver Ammunition Systems in its role as the Single Manager for Conventional Ammunition.
Performance
In the last five trading days, share prices of all the major defense companies were in positive territory. L-3 Communications Holdings gained the most, followed by Northrop Grumman Corp. NOC.
In the last six months, the picture remains mixed with losses and gains. Although share prices of Lockheed Martin LMT, General Dynamics GD, Raytheon RTN and Northrop Grumman were in the green, Boeing, Rockwell Collins, Textron and L-3 Communications Holdings ended in the red.
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 |
1.87% |
10.43% |
|
BA |
4.49% |
-7.02% |
|
GD |
2.66% |
7.67% |
|
RTN |
2.62% |
4.75% |
|
NOC |
5.21% |
9.40% |
|
COL |
2.64% |
-11.31% |
|
TXT |
4.17% |
-9.79% |
|
LLL |
5.52% |
-7.81% |
What’s Next in the Defense World?
Lockheed Martin is expected to report third-quarter 2015 financial results on Oct 20 before the opening bell. Boeing and Raytheon are also to report their quarterly results on Oct 21 and Oct 22, respectively, before the market opens.
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