The Zacks Analyst Blog Highlights: Lockheed Martin, Northrop Grumman, Textron, Boeing and General Dynamics

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Jul 16, 2014, 09:30 ET

CHICAGO, July 16, 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), Northrop Grumman Corp. (NYSE:NOC-Free Report), Textron Inc. (NYSE:TXT-Free Report), Boeing Co. (NYSE:BA-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 Industry Stock Update

All of the big defense stocks closed in the green over the last five trading sessions on the back of some encouraging news for the sector.

Among the important updates, FMS, or the shorthand for Foreign Military Sales, was the key for the defense sector last week with sales of $11 billion promised to Qatar. Also, as per the latest buzz, the U.S. military officials have lifted the grounding order on Lockheed Martin Corp.'s (NYSE:LMT-Free Report) F-35 fighter jets. In our last Roundup we mentioned how the grounding of the jets had put contract negotiations for the next batch of fighter jets and engines on hold.

Iraq Update

A classified military assessment of Iraq's security forces concluded that only about half of the country's military units are capable of being advised by American troops, while many have been permeated by either Sunni insurgent informants or Shiite militia members backed by Iran.

The published report also stated that the American troops might face security risks if they are told to train certain military units as Iraqi forces are reliant on the Shiite militias as well as advisers from Iran's paramilitary Quds Force.

The final report will be prepared for the Defense Secretary Chuck Hagel and other Pentagon officials later this week. The Central Command and the Joint Staff will then develop reports that would influence the Obama administration's decision about whether or not to send more advisers, weaponry, and surveillance systems to help Iraq fight the Islamic State in Iraq and Syria (ISIS). The insurgents have seized the key cities of Mosul and Tikrit.

The al-Qaeda connected Sunni militant group, the ISIS, had already declared the establishment of a caliphate, an Islamic state, spanning large areas of Iraq and Syria.

Recap of the Week's Most Important Stories

1. The Pentagon has signed an $11 billion agreement with the Persian Gulf state of Qatar for the sale of Apache attack helicopters and Patriot and Javelin air-defense weapons. This weapons deal – the biggest for the U.S. in 2014 – was signed at the Pentagon by Secretary Hagel and Qatar's defense minister, Hamad bin Ali al-Attiyah.

2. The U.S. military officials have lifted the grounding order for Lockheed Martin's F-35 fighter jets. However, the authorities will impose certain operating restrictions on the jets as investigations related to the failure of the engine on a U.S. Air Force jet last month are ongoing.

Pentagon's No. 1 contactor Lockheed's F-35 Joint Strike Fighter jet missed the world's biggest military air show last week – Britain's Royal International Air Tattoo ("RIAT") – where the combat jet was to make its international debut. The RIAT was held from Jul 11-Jul 13, 2014 in Fairford, Gloucestershire. It also remains unclear whether the fighter jet will appear at the Farnborough show.

3. Meanwhile, BAE Systems – Europe's prime defense contractor – expects to grab most of the F-16 fighter jet modernization market. We note that in 2012 BAE Systems had won an F-16 upgrade work in South Korea, wrenching the monopoly from Lockheed Martin. Now, BAE Systems expects to enjoy more than half of the $10 billion market for F-16 fighter jet upgrades over the next decade.

4. Although Lockheed has run up against F-35 glitches lately it still managed to win yet another modification contract to a previously awarded F-35 low rate initial production (LRIP) Lot 6 contract. The latest contract, worth $278.6 million, provides for non-recurring sustainment activities including the procurement of Depot Phases I-IV sustainment activities.

5. Northrop Grumman Corp. (NYSE:NOC-Free Report) won a $198.9 million contract from the U.S. Navy. Per the contract, Northrop will be entrusted with the responsibility to design, develop, and implement the Airborne Electronic Attack requirements for software configuration and ancillary hardware in support of the EA-6B and EA-18G aircraft for the U.S. and the government of Australia. The U.S. Navy will pay 90% of the total contract and the rest will be paid by the Australian government (read more: Northrop Grumman Wins Three Defense Contracts).

Shares of all defense biggies were in the green in the past one week. The biggest gainer Textron Inc. (NYSE:TXT-Free Report) rose 2.85% over the time frame, with Lockheed Martin following suit. In the past six months, the companies have reported in the green (except for The Boeing Co. (NYSE:BA-Free Report). General Dynamics Corp. (NYSE:GD-Free Report) registered double-digit share price growth.

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

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