With the latest U.S. jobs data signaling a six-and-a-half-year low in the unemployment rate, will the defense space also see a spurt in hiring? To that tune, Raytheon (NYSE:RTN) inked a deal with the state of Indiana that will likely add 250 jobs in Indianapolis over the next few years.
Among the important updates over the past five trading days, Sikorsky Aircraft secured a Defense Logistics Agency contract. Newly formed Orbital ATK (NYSE:OA) an aerospace and defense technology major − signed a military contract for Precision Guidance Kits. Lockheed Martin (NYSE:LMT) also scored quite a few defense deals.
Investors should also be happy about General Dynamics (NYSE:GD) hiking its quarterly dividend.
Recap of the Week’s Most Important Stories
1. Raytheon plans to expand its operations in Indianapolis, IN. The state is luring Raytheon with incentives worth up to $4.4 million in a deal that will likely add 250 jobs in Indianapolis over the next few years. This will mark a 25% increase in employees at its Indianapolis facility – Raytheon’s largest workforce expansion since it took over the site in 1998.
Work at the facility − which already employs 1,000 Hoosiers − will focus on areas of depot support, comprising modernizing and upgrading the capabilities of military platforms, systems engineering and systems installation. The facility already develops leading-edge, soldier-worn computers and provides weapons system sustainment, supply chain management and systems engineering among other services to commercial and military customers.
2. United Technologies (NYSE:UTX). subsidiary − Sikorsky Aircraft Corp. – received a $163 million contract from Defense Logistics Agency to provide spare aircraft parts to the U.S. Army, Navy, Air Force and Marine Corps, extending the company’s streak of procurement awards. Work under this five-year, sole source, firm-fixed-price contract will be done in Connecticut with an expected completion date of Feb 2020. The contract covers spare parts for multiple aircraft platforms.
3. Orbital ATK has been awarded a $120 million Army contract to build more Precision Guidance Kit (“PGK”) for 155mm artillery shells. The contract calls for Orbital ATK to build, test and deliver precision guidance kits for the U.S. Army‘s 155-millimeter artillery shells. The company began low-rate initial production of the projectile guidance systems in January and is slated to commence kit deliveries in early 2016.
4. Boeing (NYSE:BA) has invested in a Softbank Group joint venture (“JV”) for the development of a satellite-based disaster response communications system for Japan. The financial terms of Boeing’s stake in the JV − SoftBank Satellite Planning Corp. – have not been disclosed. Only after evaluating the concepts will the parties recommend the same to Japan’s Ministry of Internal Affairs and Communications.
5. General Dynamics announced that its board of directors has approved of an increase in the quarterly dividend rate by 7 cents. The revised quarterly dividend of 69 cents will be paid on May 8, 2015, to shareholders of record at the close of business on Apr 10, 2015. Increasing the dividend has become an annual ritual for this defense major. This will be the 18th consecutive annual dividend hike approved by its board of directors. The annualized payout amounts to $2.76 per share, up 11.3% from the prior rate.
Performance
Overall, the defense stocks remained bearish during the last five trading sessions barring Rockwell Collins (NYSE:COL) and Textron (NYSE:TXT). L-3 Communications Holdings (NYSE:LLL) lost the most, followed by Northrop Grumman (NYSE:NOC). The picture is somewhat optimistic in the past six months with no losses being noticed. Northrop Grumman retains its top position in the list, followed by Rockwell Collins.
The following table shows the price movement of the major defense players over the past five trading days and during the last six months.
What’s Next in the Defense World?
With no major development expected next week, the performance of these defense stocks is likely to stay in line.
We remind investors that the Zacks Industry Rank for aerospace/defense is in the bottom one-third of the list of 260-plus industries, putting it in the negative zone for now. Despite the uncertainty related to budget, the prospects are still very much in place keeping in mind the ongoing recovery in the U.S. economy and the country’s involvement in the Iraqi civil war.