Lockheed, Raytheon, Northrop Grumman and more. How the US defense giants sprint on Wall Street
The defense sector is up 14% on the stock market so far this year, outperforming the S&P 500 by 39%. Manufacturers benefit from contracts to support arms shipments to Ukraine, but there is the question of stockpiles and production…
Several defense stocks performed brilliantly on Wall Street in 2022.
Defense contractors have been the stars of the stock market this year, even if they are not immune from macroeconomic headwinds. “The shares of some defense companies gained on the stock market this year: Lockheed 36%, Northrop Grumman 37%, Raytheon 14%”, Il Sole 24 Ore reported in recent days.
"Russia's invasion of Ukraine in February sparked a defense recovery that fizzled as the hoped-for wave of new orders took longer to materialize," notes the Wall Street Journal . However, the sector is up 14% so far this year, outperforming the S&P 500 by 39%, according to Vertical Research Partners.
Nearly 10 months after Russia's full-scale invasion of Ukraine, governments say they are committed to increased defense budgets. However, amid so much economic uncertainty, they have been slow to sign the multi-year procurement contracts defense groups need to ramp up production, the Financial Times points out. And at the same time, allies who have supported Kiev's war effort are increasingly concerned by the challenge of ramping up munitions production as the conflict burns through stockpiles fast.
ALL THE LATEST SHOTS SCORED BY LOCKHEED MARTIN
The day after its earnings report, Lockheed Martin jumped 8.69% as the arms maker posted stronger-than-expected quarterly revenue and maintaining guidance for 2022.
Meanwhile, the US defense giant earlier this month was awarded a $431 million contract by the US Army for the full-scale production of M142 high-mobility artillery rocket launchers with the aim of rapidly resupplying the stocks of the United States and its allies and partners who have sent weapons to Ukraine.
Lockheed also won an Army contract last month worth $14.4 million to ramp up production capacity to rapidly replenish US stockpiles of HIMARS. The company is currently equipped to build 60 HIMARS launchers a year, but that deal, awarded in early October, will allow it to ramp production to 96 launchers a year, a company spokesperson told Defense News .
In November, the military also awarded Lockheed a $521 million deal to replenish US stockpiles of guided multiple launch missile systems, also supplied to Ukraine.
RAYTHEON AND ROLLS ROYCE ALSO BENEFIT FROM PENTAGON CONTRACTS
But Lockheed Martin isn't the only defense contractor to benefit from the Pentagon's latest orders.
And earlier this week, the US Army awarded a $1.2 billion contract to Raytheon Missiles and Defense to rapidly supply six Nasams missile system batteries for Ukraine.
Raytheon's Pratt & Whitney was also awarded a $511.5 million contract by the US Navy for annual sustainment of the F135 propulsion system. The deal includes program management, spare parts supply, propulsion integration and engine support. In addition, Raytheon Missiles and Defense was awarded an $84 million contract by the Army for 155mm lb. Excalibur Increment shells.
At the end of November, Rolls Royce was awarded a 228 million dollar contract by the Navy for technical and logistical support services for the KC-130J propulsion systems (the tankers produced by Lockheed Martin).
STOCK QUESTION
After sending more than $40 billion in military support to Ukraine ($20 billion from Washington alone), mostly from existing stockpiles, NATO member defense ministries are finding that dormant weapons production lines cannot be activated overnight. Increasing capacity requires investments that, in turn, depend on obtaining long-term production contracts, highlights the Ft .
The United States has sent about a third of its stockpile of Javelin anti-tank missiles and a third of its stockpile of Stinger anti-aircraft missiles to Ukraine. But they have little prospect of being able to replace them quickly.
According to Raytheon CEO Greg Hayes, the company may not be able to produce more Stingers until at least 2023. "It will take some time" Hayes had stressed since some components are no longer commercially available, therefore the company will have to redesign the electronics. The Stinger production line was shut down in December 2020, the Pentagon said. In July 2021, Raytheon won a contract to produce more Stingers, but mostly for international governments, according to the US military.
"It's a corporate finance issue," a senior European defense official told the British newspaper. “No company wants to invest in a second factory line to increase production without long-term contractual certainty. Will Russia still be a threat in five years, and if not, will governments continue to buy weapons from companies?”
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/lockheed-raytheon-northrop-grumman-e-non-solo-come-i-colossi-usa-della-difesa-sprintano-a-wall-street/ on Sun, 11 Dec 2022 08:01:55 +0000.