Over the past five trading days, the major defense companies have traded in the red. Although the sector snapped up a few big deals, investors were not too impressed with defense stocks leading to big sell-offs in many names.
In the past one week, United Technologies Corp. (UTX) and Lockheed Martin Corp. (LMT) enjoyed most of the attention as it successfully clinched quite a few defense deals.
On the other hand, The Boeing Co.’s (BA) share price continued to suffer, failing to win back investor confidence.
(Read Defense Stock Roundup for Nov 25, 2014 for a recap.)
Iraq Update
As part of its proclaimed Inherent Resolve strategy, the U.S. military has conducted as many as 55 airstrikes against Islamic State (IS) forces in Iraq and Syria since Nov 28, 2014, comprising 27 in Syria and 28 in Iraq using fighter, bomber, and remotely-piloted aircraft.
Coalition nations conducting airstrikes in Iraq include the U.S., Australia, Belgium, Canada, Denmark, France, the Netherlands and the United Kingdom. Coalition nations conducting airstrikes in Syria include the U.S., Bahrain, Jordan, Saudi Arabia and the United Arab Emirates.
Meanwhile, the Pentagon said that Iranian fighter jets have bombed Islamic State militants in eastern Iraq. A Pentagon spokesman clearly said that the U.S. has not coordinated airstrikes or military activities with Iran.
Tehran and Washington have no formal partnership but share a common enemy − the IS group − which both governments view as a dangerous threat.
Recap of the Week’s Most Important Stories
1. United Technologies Corp.’s unit − Sikorsky Aircraft Corp. – won a $316.2 million modification contract from the U.S. Army. Per the contract, the company will continue providing services and parts for a weapons system used in one of its helicopters. Sikorsky will provide technical, engineering and logistical services and supplies, as well as component and airframe parts, for the overhaul, repair and recapitalization of the H-60 weapons system.
Additionally, the U.S. Department of Defense (DoD) awarded a $105.5 million modification contract to United Technologies Corp.'s aircraft engines subsidiary Pratt & Whitney. The cost-plus-incentive-fee modification contract includes hardware and training course materials and equipment for low-rate initial production of F135 propulsion systems that go into the military's F-35 Lightning II Joint Strike Fighter (:JSF) jets. The contract also provides for propulsion system hardware and training purchases for the United States’ unnamed international partners.
2. Lockheed Martin Corp. received numerous contacts from the DoD order book. This defense prime won a $492 million contract from the U.S. Navy to provide non-air vehicle spares, support equipment, Autonomic Logistics Information System hardware and software upgrades, supply chain management, full mission simulators and non-recurring engineering services to support Low Rate Initial Production Lot VII F-35 Lightning II JSF aircraft (read more: Lockheed Martin Wins Three Defense Contracts Worth $626M).
3. Meanwhile, as per media reports, Israel will trim its second batch of Lockheed Martin’s F-35 Lightning II JSF jets, as the Israeli cabinet authorized on Nov 30 the immediate purchase of 14 F-35A Lightning II fighter jets with the option of ordering 17 more in 2017 (read more: Israel Slows Down Purchase of Lockheed Martin's F-35 Jets).
4. General Dynamics Corporation’s (GD) unit, General Dynamics Ordnance and Tactical Systems, and leading firearm manufacturer Smith & Wesson Holding Corporation has partnered to compete for the U.S. Army’s Modular Handgun System (“MHS”) program to replace the M9 standard Army sidearm (read more: General Dynamics in Partnership with Smith & Wesson).
Performance
Over the last five trading sessions, shares of all defense biggies were in the red barring Lockheed Martin and Raytheon Co. (RTN). The biggest loser Textron Inc. (TXT) lost 3.5% over the time frame followed by Boeing.
In the past six months, the picture was somewhat mixed. All the major defense companies have reported gains except Boeing. General Dynamics Corp., Lockheed Martin and Northrop Grumman Corp. (NOC) registered double-digit share price growth, with General Dynamics leading the way. All other biggies have reported single-digit share price appreciation in the six months time fame while Boeing is slowly losing its spot with a telling 2.65% decline. L-3 Communications Holdings Inc. (LLL) registered just a 1% price appreciation over this time frame.
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 |
+0.76% |
+16% |
|
BA |
-1.88% |
-2.65% |
|
GD |
-0.26% |
+21.85% |
|
RTN |
+0.36% |
+9.08% |
|
NOC |
-0.98% |
+15.38% |
|
COL |
-0.32% |
+7.35% |
|
TXT |
-3.5% |
+7.44% |
|
LLL |
-0.4% |
+0.96% |
What’s Next in the Defense World?
We remind investors that the Zacks Industry Rank for aerospace/defense is within the top one-third of the list of 260-plus industries. Hence, the prospects of this industry are still very much in place. (to know more, please see: Zacks Industry Rank).
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