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Pentagon’s prime contractor, Lockheed Martin Corp. (LMT - Analyst Report), will join forces with Bombardier and Raytheon Co. (RTN - Analyst Report) to contend for the U.S. Air Force's next-generation JSTARS replacement. For now, Lockheed Martin has secured a big contract modification to develop the ballistic missile defense command and control program.
Huntington Ingalls Industries, Inc. (HII - Snapshot Report) broke ground for building a new joint manufacturing assembly facility in Newport News, VA.
(Read Defense Stock Roundup for Jun 16, 2015 here.)
Recap of the Week’s Most Important Stories
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1. Lockheed Martin Corp. secured a big pie from the Pentagon’s daily funding list, worth $870 million. The U.S. military awarded Lockheed Martin a contract to continue developing the ballistic missile defense (“BMD”) command and control program that enables senior U.S. officials to plan BMD operations.
The company will continue engineering, development, test, integration, fielding and on-site operations and sustainment support for the command and control, battle management and communications (“C2BMC”) system located worldwide for the Ballistic Missile Defense System.
This is a modification contract that brings the total cumulative contract value to $2.1 billion from $1.2 billion. The work is expected to be completed by Dec 31, 2021.
2. Lockheed Martin will collaborate with Bombardier and Raytheon to compete for the U.S. Air Force's next-generation Joint Surveillance Target Attack Radar System (“JSTARS”) Recapitalization program. The team will build a replacement for the aging JSTARS aircraft.
Lockheed Martin will act as the lead systems integrator, while Raytheon will bring its expertise in ground surveillance, intelligence, surveillance and reconnaissance systems, mission systems integration, and JSTARS communications. Bombardier for its part will provide its ultra-long-range Global business jet platform that is less pricey to operate than modern airliners.
Meanwhile, Northrop Grumman Corp. (NOC - Analyst Report) recently announced that it would team up with General Dynamics Corp. (GD - Analyst Report), Gulfstream and L-3 Communications Holdings Inc. (LLL - Analyst Report) to compete for the program. This means Northrop Grumman and Lockheed Martin will confront each other on both the B-3 bomber program and the JSTARS recap.
The contract from the Air Force has not yet been awarded.
3. Raytheon Company has won a multi-year contract from the U.S. Navy to produce 53 maritime, littoral and overland surveillance radars, known as AN/APY-10, valued at $153 million. The radars will be used in Boeing’s (BA) P-8A Poseidon aircraft. So far, Raytheon has delivered about 62% of the previous order of 58 AN/APY-10 radars from the U.S. Navy.
Last week, another category of Raytheon’s radars – AN/TPY-2 ballistic missile defense radar – received a green signal from the U.S. government for its use in forward-based mode by its allies (read more: Raytheon Wins Surveillance Radar Orders from U.S. Navy).
In another development, Raytheon announced that along with the U.S. Navy, it has completed operational testing and evaluation of live fires of the AIM-9X Sidewinder Block II infrared air-to-air missile. The U.S. government is now finalizing the approval, acceptance and delivery of Block II missiles to the U.S. and foreign allies, which are scheduled later this year. Block I missiles have been delivered to nine U.S. allies, while seven customers have already signed up for deliveries of Block II by the beginning of this year (read more: Raytheon Completes AIM-9X Missile Testing with U.S. Navy).
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4. United Technologies Corporation’s (UTX - Analyst Report) unit, Sikorsky Aircraft, completed the delivery of six CH-148 Cyclone helicopters to the Canadian government. The helicopters are the first batch of an order of 28 Cyclone aircraft that Sikorsky is scheduled to deliver to the Canadian Armed Forces (read more: UTX's Sikorsky Delivers 6 Cyclone Helicopters to Canada).5. Huntington Ingalls Industries, Inc.’s Newport News Shipbuilding segment broke ground for building a 250,000-square-foot joint manufacturing assembly facility. The facility’s first two phases, to open in 2017, will support work under current contracts for the Navy's new Gerald R. Ford-class nuclear-powered carriers and Virginia-class submarines. It will be among the largest at the shipyard.
Meanwhile, as a part of its planned incremental availability, Newport News Shipbuilding clinched a $23.8 million contract from the U.S. Navy for nuclear propulsion and complex modernization work on the aircraft carrier USS George H.W. Bush (CVN 77). The modernization work is expected to be completed by Nov 2015 at Norfolk Naval Shipyard.
Performance
The last five trading days have seen gains for the sector overall led by Northrop Grumman and followed by Boeing.
The picture in the past six-month period is mixed with gains as well as losses. Only Boeing and Rockwell Collins have been able to register double-digit gains. Lockheed Martin, Raytheon and L-3 Communications on the other hand have failed to end in the green. General Dynamics, Northrop Grumman and Textron registered single-digit share price appreciation.
The following table shows the price movement of the major defense players over the past five trading days and during the last six months.Click & Close Ads
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Monday, July 6, 2015
