Defense Stock Roundup: L-3 Unit Scores $1B+ Air Force Tanker Contract; LMT, ULA In Winning List

After negotiating market volatilities over the past few weeks, defense stocks have more or less regained their losses in the last five trading days. A few big names like Raytheon Co. (NYSE:RTN) , L-3 Communications Holdings Inc. (NYSE:LLL) and Huntington Ingalls Industries, Inc. (NYSE:HII) have even attained new 52-week highs.

Among the important highlights last week, L-3 Communications Holdings has clinched an almost $2 billion dollar defense contract. Other prime contractors like Lockheed Martin (NYSE:LMT) and United Launch Services, LLC also won important contracts.

(Read Defense Stock Roundup for Jun 1, 2016 here.)

Recap of the Week’s Most Important Stories

1. L-3 Communications Vertex Aerospace LLC, a unit of L-3 Communications Holdings Inc., has won a contract worth $1.9 billion to provide KC/KDC-10 aerial refueling tanker aircraft logistics support until 2025 to the U.S. Air Force and to the government of the Netherlands.

“The contractor will provide all support required to fulfill this requirement, including but not limited to labor, materials, tools, equipment, parts and transportation,” the Pentagon said.

Vertex Aerospace will provide logistics integration and support to include contractor operated and maintained base supply, aircraft maintenance to include depot and contractor field teams, and also modifications for service bulletins and time compliance technical orders. The contractor will also support the KDC-10 including the Remote Aerial Refueling Operator System for the Netherlands.

2. Lockheed Martin Corp. has received a five-year, single-award, indefinite delivery, indefinite quantity (“IDIQ”) contract to support the Aircrew Electronic Warfare Tactical Training Range or AEWTTR project in Ridgecrest, CA. The contract has a ceiling value of $424 million.

Awarded by the U.S. Naval Air Warfare Center – Weapons Division, the company will provide tactical training products and services for Navy pilot training through the development of threat radar emitter simulators and other target/threat peripheral equipment.

3. Raytheon Co. has been awarded a contract by the U.S. Marine Corps for repair and rebuilding work on a fleet of mission vehicles.

The contract has a ceiling value of $249 million with options of over five years for work on the Secondary Reparable, or SECREP program, rebuilding vehicle parts such as engines, transmissions and electronics, the release said.

The contract includes about 1,000 various items serviced by a network of original equipment manufacturers, military depots and small business suppliers.

4. United Launch Services, LLC (“ULS”), a subsidiary of United Launch Alliance (“ULA”), which is a joint venture (“JV”) between Lockheed Martin Corp. and The Boeing Co. (NYSE:BA) , has won a modification contract from the U.S. Air Force for launch vehicle production services (“LVPS”).

Per the contract, which has been valued at $138.7 million, ULS will provide the required services for fiscal 2016 LVPS to support the Air Force Atlas V 541’s launch vehicle configuration and mission specific supplies for four missions that were ordered earlier.

5. General Dynamics Corporation’s (NYSE:GD) unit, National Steel and Shipbuilding Co. (“NASSCO”) has received a $106.2 million long lead contract for the Navy’s third Expeditionary Mobile Base (“ESB”) – formerly known as the Afloat Forward Staging Base.

“This action allows the procurement of ship sets of the purchase specifications supporting integrated propulsion, main diesel generator engines, propeller and shafting, integrated bridge electronics, centrifugal pumps, fuel and lube oil purifiers and steering gear components,” per the release.

It will be the fifth Military Sealift Command ship based on an Alaska-class crude oil tanker design and the third of three planned ESBs.

Performance

Defense stocks were much better off in the past one week than in previous weeks. Almost all the major defense stocks were trading in the green baring General Dynamics. Textron Inc. (NYSE:TXT) appreciated the most followed by Boeing.

In the past six months, however, the picture is somewhat mixed. Northrop Grumman (NYSE:NOC) remained in the leading position while Boeing was the biggest loser.

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?

Boeing, Rockwell Collins (NYSE:COL) and Huntington Ingalls will attend Deutsche Bank (DE:DBKGn) Global Industrials and Materials Summit on Jun 8, 2016.

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