The Zacks Analyst Blog Highlights: Lockheed Martin, Boeing, AAR, Raytheon and General Dynamics

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Oct 01, 2014, 09:30 ET

CHICAGO, Oct. 1, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Lockheed Martin Corp. (NYSE:LMT-Free Report), Boeing Co. (NYSE:BA-Free Report), AAR Corp. (NYSE:AIR-Free Report), Raytheon Co. (NYSE:RTN-Free Report) and General Dynamics Corp. (NYSE:GD-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday's Analyst Blog:

Defense Stock Roundup

Over the last five trading sessions, the shares of the big defense contractors were rather mixed though there was no dearth of events. Lockheed Martin Corp. (NYSE:LMT-Free Report) grabbed most of the limelight with South Korea giving the green signal for the multi-billion dollar F-35 deal.

The company also secured big contracts from the U.S. Department of Defense (DoD) and boosted its dividend payout and share repurchase authorization. The Boeing Co. (NYSE:BA-Free Report) is planning to consolidate its defense business, moving most of its engineering work out of the Puget Sound region. On the other hand, AAR Corp. (NYSE:AIR-Free Report) missed the Zacks Consensus Estimate on both the top and bottom line in its fiscal first quarter 2015.

(Read the last recap here: Defense Stock Roundup for Sep 23, 2014.)

IraqUpdate

As part of the planned expanded mission announced by President Obama lately, the U.S. military's air strikes against the Islamic State of Iraq and the Levant (ISIL) in Syria appear to have halted advancing militants in a town west of Baghdad. The U.S. has deployed a mix of fighter planes, bomber aircraft and Raytheon Co.'s (NYSE:RTN-Free Report) Tomahawk Land Attack missiles.

The U.S. was joined in the Syria operation by Bahrain, Qatar, Saudi Arabia, Jordan and the United Arab Emirates. The U.S. fighter planes have conducted 74% of more than the 240 airstrikes in Iraq and Syria since Aug 8, 2014.

With the U.S. administration's pledge to engage in a long-term and more proactive intervention in Iraq, the defense stocks might see some gains going forward.

Recap of the Week's Most Important Stories

1. Defense prime Lockheed Martin Corp. once again proved its dominance as well as its investor friendly nature. The company increased its fourth quarter dividend by 13% and boosted its share repurchase authorization by $2 billion (read more: Lockheed Boosts Dividend & Stock Buyback, Slows Pace).

Importantly, the Republic of Korea has finally agreed to purchase 40 of Lockheed Martin's F-35 Lightning II Joint Strike Fighter (JSF) aircraft for its F-X fighter acquisition program. This major buy will beef up the nation's stealth capability in response to North Korea's growing nuclear threat (read more: Lockheed Martin to Finalize $7.1B F-35 Deal with South Korea).

Apart from the promised South Korean deal, the defense behemoth grabbed quite a few contracts from the DoD funding list. Of them, the largest win included a $413.2 million modification contract from the U.S. Air Force to build seven aircraft, comprising one HC-130J "Combat King II" search-and-rescue aircraft and six MC-130J Commando II aircraft, used for special operations and rescue and recovery efforts. The procurement will be completed by Nov 30, 2015.

The company also won a $331.4 million modification contract from the DoD. The contract won by Lockheed Martin Aeronautics Co. is aimed at procuring production non-recurring items, comprising special tooling, special test equipment items and software lab upgrades in support of the F-35 Lightning II JSF aircraft for the U.S. Marine Corps, U.S. Air Force, U.S. Navy, international partners and foreign military sales.

2. Boeing also won a $499 million contract from the DoD for providing engineering logistical support services for all H-47 helicopter variants.

In a separate development, Boeing announced its plans to further consolidate its defense business to pare costs amid a declining U.S. military budget. The company will relocate the majority of its defense services and support work out of Washington state to Oklahoma City and St. Louis. This transition will take around three years affecting about 2,000 of its 5,200 defense jobs in the Puget Sound region. The move would not affect Boeing's P-8A spy plane or KC-46 aerial refueling tanker programs.

3. Aerospace and defense products and services supplier AAR Corp. missed the top and bottom line Street Consensus in its fiscal first quarter 2015 (ending Aug 31, 2014) results. The company's quarterly earnings missed the Street estimate by 12.2%. The company also slashed its earnings as well as revenue expectation for fiscal 2015 (read more: AAR Corp Misses on Q1 Earnings & Revenues, Guides Lower).

4. General Dynamics Corp. (NYSE:GD-Free Report) unit Electric Boat recently received a contract worth $310.8 million from the U.S. Navy, for support of active nuclear submarines (read more: General Dynamics to Render Nuclear Submarine Support).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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