Defense stocks rose as the market rallied this week on former Vice President Joe Biden’s projected victory over President Donald Trump and promising preliminary early results from Pfizer’s COVID-19 vaccine trials. That was particular relief to Boeing, Raytheon, and Textron, all of whose commercial-aviation revenues have been hit hard by the steep drop in passenger air travel.
J.P. Morgan analyst Seth Seifman upgraded shares of Raytheon Technologies and Spirit from Hold to Buy. Seifman also upped his price target for both stocks, MarketWatch reports.
But Northrop Grumman’s stock remained flat. Why? There’s concern among investors that Biden will cancel the company’s $96 billion contract to build new intercontinental ballistic missiles under the Ground Based Strategic Deterrent program, analysts say. But that will be no slam dunk, especially if Republicans are able to keep control of the Senate.
Northrop Grumman CEO Kathy Warden, speaking at a Baird investors conference on Wednesday, said she expects the Biden administration to conduct a Nuclear Posture Review, just as the Obama administration did in 2010 and the Trump administration did in 2018. “Both of those concluded that the path that we're on for modernization of the ICBMs with the current GBSD program is the right path,” Warden said. “And I fully expect that to be the conclusion if another review was conducted.”
Meanwhile, the vaccine progress sank shares of Zoom, Peloton and others companies that have soared with so many people working from home.
Preparing for the transition. Even though President Trump has refused to concede and a formal transition hasn’t begun, President-elect Biden has named agency review teams that include many familiar names from the Obama administration. The Defense Department team is led by Kath Hicks, and includes Susanna Blume, Sharon Burke, Michelle Howard, Andrew Hunter, Mike McCord and Christine Wormuth.
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Raytheon to Buy Satellite Company
The company expects to close its acquisition of Blue Canyon Technologies — maker of small satellites and spacecraft systems components — early next year. “This was a relatively small acquisition for us; about $350 million net of tax benefits,” Raytheon CFO Toby O’Brien, said Wednesday at a Baird investors conference. “But it's strategic and it will enable us to deliver a broader range of solutions to support our customer space missions.” Blue Canyon will become part of Raytheon’s Intelligence & Space division.
Telos Going Public
The Virginia-based cyber/cloud firm is planning an initial public offering of 12,352,942 primary shares. The company intends to list its stock on the NASDAQ using the ticker symbol TLS.
FAA Could Clear 737 Max Next Week
Reuters reports that the agency could finish its review of the long-grounded airliner involved in two deadly crashes in 2018 and 2019. “The ungrounding would be a vital step in a still-arduous path to recovery for Boeing, plunged into its worst-ever crisis by the crashes and the worldwide grounding of its best-selling plane in March 2019,” Reuters writes.
In Europe, New Entrée for US Industry
U.S. companies will be able to bid for collaborative European Union defense projects under new rules that Washington has lobbied for over the past two years. Washington had argued that the EU pooling of money on defense projects could hurt NATO contributions. “We welcome the European Council’s decision to finalize PESCO third state participation guidelines that address some longstanding U.S. concerns,” a State Department spokesman said. “The guidelines demonstrate our European Allies’ and partners’ commitment to ensure U.S. participation in European defense initiatives, enhance NATO-EU cooperation and interoperability, and strengthen Transatlantic security.”
Europeans Place Tariffs on Boeing Planes. Meanwhile, the European Union said it would impose $4 billion in tariffs on U.S.-made aircraft and other goods. The airliner tariff is 15 percent. Officials are hopeful for a settlement in the coming months, the New York Times reports.
Germany Inks Deal for 38 Eurofighter Typhoons
The Luftwaffe chose the Eurofighter over the Lockheed Martin F-35 Lightning II. “This makes Germany the largest ordering nation in Europe's biggest defence programme,” said Airbus officials, who make the fighter jet with BAE Systems and Leonardo. The planes will fly into the 2060s. The consortium is also pitching the Typhoon against the U.S.-made F-35 and F/A-18 Super Hornet in Switzerland and Finland.
Saudi Arabia Upgrades F-15s
The Pentagon awarded Boeing a $9.8 billion deal for the Saudi jets. The contract “provides for modernization and sustainment of the F-15 Saudi fleet to include such efforts as hardware, software, and interface design, development, integration, test, subsystem and structural component production and installation of future modifications and enhancements to the F-15 Saudi weapon system as well as product support.”
Meanwhile, the U.S. Navy awarded Textron’s Airborne Tactical Advantage Company a $441 million deal to support 8,500 hours of training with its Mirage F1, F-21 Kfir, and Mk-58 Hawker Hunter fighter aircraft.
SAC Releases Approps Markup
In an attempt to avert a government shutdown on Dec. 12, the Senate Appropriations Committee released its markup of 12 federal spending bills. Based on the mark, the Pentagon’s investment accounts — the combination of procurement and research and development — would fall 1.4 percent between fiscal 2020 and fiscal 2021, according to Cowen & Company analyst Roman Schweizer. Still, Senators added P-8 sub hunters, V-22 Osprey, F-35s and C-130s to the Pentagon’s request.
Sea-Air-Space Shifts to Summer
The Navy League conference, usually held in April has been rescheduled for Aug. 1 to Aug. 4, 2021. Organizers are planning for the usual in-person event at the Gaylord National Harbor just across the Potomac River from Alexandria, Virginia. Sea-Air-Space was one of the first conferences canceled this year due to the COVID-19 pandemic.
- President Trump’s shakeup of leadership across the national security establishment continues. He sacked former Defense Secretary Mark Esper and former Acting Defense Undersecretary for Policy James Anderson. Christopher Miller has been named acting SecDef; Anthony Tata, a controversial retired one-star Army general, will perform the duties of the undersecretary for policy.
- Last week, National Nuclear Security Administration Administrator Lisa Gorgon-Hagerty resigned, after reportedly clashing with Energy Secretary Dan Brouillette. William Bookless, the NNSA principal deputy administrator, is now the acting NNSA administrator.
- Boeing named Jinnah Hosein vice president of software engineering, a new position at the aerospace and defense firm. Hosein previously worked at SpaceX, Tesla and Google.
- Retired Army Lt. Gen. Charles Hooper, who most recently led the Pentagon’s Defense Security Cooperation Agency, has been named a nonresident senior fellow in the Scowcroft Center for Strategy and Security at the Atlantic Council.
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