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Defense Stock Roundup: Contract Wins Dominate Headlines, RTX, HII Score Big

Zacks Equity Research

Major indices of the Aerospace-Defense space ended in the green over the trailing five trading sessions, buoyed by a modest flow of contracts from the Pentagon. Evidently, the S&P 500 Aerospace & Defense (Industry) index inched up 2.4%, while the Dow Jones U.S. Aerospace & Defense index rose 3% in the aforementioned time period.

Among past week’s highlights, defense majors Raytheon Technologies, Inc.RTX, Huntington Ingalls Industries Inc. HII, Northrop Grumman Corp. NOC and Lockheed Martin Corp. LMT secured a number of notable deals from the Department of  Defense’s daily funding session.

Recap of Past Week’s Important Stories

1.   Raytheon’s Integrated Defense Systems unit won a production contract worth $2.27 billion under the Foreign Military Sales (FMS) program. Per the terms, the company will provide seven Army/Navy Transportable Surveillance and Control Model 2 radars, radar spares, sustainment services and initial contractor logistics support services to the Saudi Arabian (KSA) military.

Work related to the deal will be executed in Woburn, MA, with an estimated completion date of Aug 31, 2027 (read more: Raytheon's IDS Unit Wins $2.27B Deal to Support KSA Military).

2. Huntington Ingalls secured a modification contract worth $936 million to exercise the fiscal 2020 option for the construction of a USS Arleigh Burke DDG-51 class ship. Work related to the deal is scheduled to be over by June 2027.

The deal also includes options for engineering change proposals, design budgeting requirements and post-delivery availabilities on the DDG 51 ship (read more: Huntington Ingalls Wins $936M Deal to Support DDG 51 Ships).

3. Northrop Grumman’s business unit, Northrop Grumman Systems clinched a modification contract worth $333.4 million for production and delivery of three MQ-4C Triton unmanned aircraft. The company will also offer associated export compliance support under the terms of the deal.

The deal is expected to be completed by April 2025, while majority of the task will be carried out in San Diego and Palmdale, CA; Red Oak, TX and Linthicum, MD (read more: Northrop Wins $333M Deal to Aid Australia's Triton Program).

4. Lockheed’s business unit, Aeronautics won a modification contract worth $361 million to procure four F-35C Carrier Variant aircraft for the Navy. Work related to this deal is expected to be completed by May 2023.

The majority of the task will be executed in Fort Worth, TX (read more: Lockheed Wins $361M Deal for F-35C Carrier Variant).

Performance

Over the past five trading sessions, the defense biggies put up a mixed show. While Boeing and Lockheed Martinlost, Northrop and Textron gained.

In the last six months, the industry's performance was disappointing. Boeing lost the most with 45% slump in share price, followed by Raytheon Technologies.

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 Past Week Last 6 Months
LMT -0.68% -7.44%
BA -4.67% -44.65%
GD 1.52% -15.25%
RTX 0.95% -34.63%
NOC 2.09% -10.62%
TXT 1.66% -28.43%
LHX 0.70% -14.25%


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