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Defense Stock Roundup: US, India Sign Military Deal, BA & RTN Win Deals

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A consistent flow of funds from the Pentagon has kept defense stocks buoyant over the trailing five trading sessions. Furthermore, the signing of the long-awaited military deal between the United States and India at the end of last week proved to be a key catalyst for the aerospace and defense industry.  

Considering this deal will widen scope for more export of U.S. defense equipment to India’s expanding military market, shares of major U.S. defense contractors saw notable gain on the release of the news on Sep 6.

As a result, the major indices of the aerospace and defense industry ended in the green during the trailing five trading period. Notably, the S&P 500 Aerospace & Defense (Industry) and the Dow Jones U.S. Aerospace & Defense indices inched up 0.5% in the aforementioned period.

Among the last week’s highlights, defense majors The Boeing Company BA, Raytheon Company RTN, General Dynamics Corp. GD and Northrop Grumman Corp. NOC secured number of notable orders from the Department of Defense’s daily funding session.

Recap of Past Week’s Important Stories

1. Boeing secured a $2.85 billion contract for the production of the fourth lot of KC-46 aircraft, spares and support equipment. The contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, Ohio.

Per the terms of the agreement, the modification includes option which if exercised will provide for an additional quantity of 18 KC-46 aircraft, two spare engines, five wing refueling pod kits, initial spares, and support equipment. With this lot, Boeing is on contract for 52 KC-46 tankers. Work related to the deal is expected to be completed by January 2022 (read more: Boeing Clinches $2.9B Deal for KC-46 Aircraft Production).

2. Raytheon won a $282 million deal for manufacturing and upgrading fiscal 2017 and 2018 DAS-4 Multi-Spectral Targeting Systems (MTS). Work related to the deal will be executed in McKinney, TX.

The contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH. Per the terms of the agreement, Raytheon will deliver 127 AN/DAS-4 MTS Model B (MTS-B) high definition/target location accuracy turrets and upgrade 40 DAS-1A to DAS-4 turret unit.

The task is scheduled to be over by Sep 30, 2020 (read more: Raytheon Secures $282M Contract to Upgrade DAS-4 MTS).

3. General Dynamics’ subsidiary, National Steel and Shipbuilding Co. (NASSCO), clinched a $219 million deal for performing fiscal 2018 docking phased maintenance work on the USS Bonhomme Richard (LHD 6) assault ship. The task is expected to be completed by May 2020.

The contract was awarded by the Naval Sea Systems Command, Washington, DC. However, the cumulative value of the contract may reach $249.2 million, if options included in this deal are exercised.

Per the terms of the contract, General Dynamics will execute maintenance, modernization and repair of the USS Bonhomme Richard vessel (read more: General Dynamics Unit Wins $219M Deal to Repair USS Bonhomme).

4. Northrop Grumman’s subsidiary, Northrop Grumman Systems Corp, clinched a $164.3 million modification contract to procure an E-2D Advanced Hawkeye Aircraft for the Government of Japan. The majority of the work will be carried out in St. Augustine, FL and Syracuse, NY.

The contract was awarded by the Naval Air Systems Command, Patuxent River, MD. The deal is expected to be over by March 2020 (read more: Northrop Grumman Wins $164M Hawkeye Aircraft Deal From Navy).

Performance

Over the last five trading sessions, defense biggies put up a mixed show. Rockwell Collins gained the most with its share price rising 2.3%, while Boeing and Raytheon suffered a decline.

The industry's performance over the last six months has also been mixed. General Dynamics lost the most with its share price declining more than 12%, while Textron gained 16%.

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 0.10% -5.36%
BA -0.44% 0.31%
GD 1.05% -12.72%
RTN -0.41% -8.04%
NOC 1.79% -13.35%
COL 2.34% 2.06%
TXT 0.75% 15.88%
LLL -1.86% -1.38%

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