The Zacks Analyst Blog Highlights: Raytheon, Lockheed Martin, Northrop Grumman, Boeing and General Dynamics
CHICAGO, Oct. 8, 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 Raytheon Co. (NYSE:RTN-Free Report), Lockheed Martin Corp. (NYSE:LMT-Free Report), Northrop Grumman Corp. (NYSE:NOC-Free Report), Boeing Company (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 Stock Roundup
Over the last five trading sessions, investors stayed gloomy as budget cuts continued to impact the order book of big contractors, resulting in big sell-offs in many names. Although budget issues will continue to plague these stocks for some time to come, defense biggies managed to win both big and small contracts from the Department of Defense (DoD) and kept their order books ticking.
Major headlines in the defense and aerospace industry this past week were made by Raytheon Co. (NYSE:RTN-Free Report). The company beat out Lockheed Martin Corp. (NYSE:LMT-Free Report) and Northrop Grumman Corp. (NYSE:NOC-Free Report) to produce 3D Long-Range Radars for Air Force. The Boeing Company (NYSE:BA-Free Report) reported strong delivery numbers for the third quarter of 2014 and Lockheed Martin received a contract modification to develop drag chute systems for F-35 Lightning II Joint Strike Fighter (JSF).
(Read Defense Stock Roundup for Sep 30, 2014 for a recap.)
Iraq Update
The U.S. has started using Boeing's Apache AH-64 attack helicopters to strike Islamic State in Iraq and Syria (ISIS) targets in Iraq. This puts American troops at higher risk as these helicopters fly at a lower altitude and at a slower speed compared with the fighter jets and bombers. Hence, the helicopter gunships are more vulnerable to hostile ground fire, threatening more troop casualties despite President Obama's "no boots on the ground" vow.
Again, as per the data released by the Pentagon, this war against the Islamic State group in Iraq and Syria has cost the defense headquarter around $1.1 billion since mid-June 2014. Of this, over $62 million alone was expended on Navy airstrikes and Raytheon's Tomahawk cruise missiles.
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. Raytheon clinched a contract to build a next-generation long-range radar system for the U.S. Air Force, beating out rival bids from Lockheed Martin Corp. and Northrop Grumman Corp. The new radar system, known as Three-Dimensional Expeditionary Long-Range Radar (3DELRR), is a ground-based system for tracking cruise missiles and drones.
This marks another major win for Raytheon in the radar market. Raytheon's initial $19.5 million deal will run through Oct 31, 2018 and will cover continued development of the 3DELRR program, and construction of three initial systems.
The Air Force then intends to buy three more systems for a total of $71.8 million. The value of the contract might increase considerably as the Air Force is expected to order 30 more radar systems. Foreign militaries could soon follow suit since the system was designed from the start to allow exports.
In a separate development, Raytheon won a $149.3 million contract from Rafael Advanced Defense Systems Ltd. to provide products for the Tamir interceptor used in the defensive Iron Dome Weapon System.
2. Boeing reported strong delivery numbers for the third quarter as well as the first nine months of 2014. In its third quarter of 2014, the aerospace giant delivered 186 commercial airplanes, approximately 9.4% higher than the year-ago figure (read more: Boeing Q3 Deliveries Increase by 9%, Boosts 737 Output).
3. Northrop Grumman Corp. won a defense contract to provide logistics and sustainment support services for the U.S. Air Force's Global Hawk weapon system. The contract is worth $306.1 million (read more: Northrop Grumman Wins $306M Global Hawk Logistics Contract).
4. Defense prime Lockheed Martin added quite a few contracts from the DoD funding list to its order book. The largest of these was a $246.6 million contract modification to develop drag chute systems for F-35 Lightning II JSF. As part of a previously awarded cost-plus-incentive-fee contract, the company and its Lockheed Martin Aeronautics Co. unit will develop, test and certify two drag chute systems for the F-35.
The U.S. Navy expects the company to complete the testing and certification process in Jul 2019. Pentagon also noted that $90 million of the modification funds will come from international partners.
5. Lockheed Martin received a $100 million indefinite-delivery/indefinite-quantity order for Joint Air to Surface Standoff Missile (JASSM) production support. The contract requires Lockheed Martin to provide JASSM system upgrades, integration, sustainment, management and logistical support. Work is slated to be completed by Sep 29, 2019.
Performance
In the past five trading days, all the major defense companies traded in the red. General Dynamics Corp. (NYSE:GD-Free Report) lost the most, followed by Lockheed Martin.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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