This Week in Defense: Italy's 1st F-35, and Rockets From Raytheon
Aug 18th 2013 7:00AM
Updated Aug 18th 2013 7:02AM
The U.S. military has a reputation as a somewhat secretive organization. But in one respect at least, the Pentagon is one of the most "open" of our government agencies. Every day of the week, rain or shine, the Department of Defense tells U.S. taxpayers what contracts it's issued, to whom, and for how much -- all right out in the open on its website.
So what has the Pentagon been up to this week?
DoD is budgeted to spend about $6.2 billion a week on military hardware, infrastructure projects, and supplies in fiscal 2013. (A further $5.6 billion a week goes to pay the salaries and benefits of U.S. servicemen and servicewomen). Lately, however, the generals have been focusing primarily on belt-tightening -- and last week was no exception, with the Pentagon awarding just over $4.04 billion to defense contractors. Among the winners:
The nation's biggest pure-play defense contractor, Lockheed Martin was one of the week's big winners, taking an early lead over its defense contractor rivals Monday, when it won an $852 million contract to supply special "tooling and test equipment" to buyers of its sixth low-rate production lot of F-35 fighter jets. Buyers include the U.S. Navy, U.S. Air Force, and international partners the United Kingdom and Italy.
Once these planes are delivered, Italy will become the third international country to have an F-35 in its air force -- the first of 90 that the country is expected to buy. To date, only the U.S. military, and those of the U.K. and Netherlands, have received F-35s.
Defense contractor Raytheon won a big contract of its own Monday -- a $200 million deal to sell hundreds of AIM-9X Sidewinder Block II short-range air-to-air missiles. Buyers under this contract include the U.S. Navy and Air Force, but also the militaries of Morocco, Malaysia, Kuwait, and Oman. On a side note, this contract also tasked Raytheon with selling the Royal Saudi Air Force a pair of Special Air Training Missiles -- live missiles that carry a telemetry package instead of a warhead, and are used for test firings.
Defense contractor Northrop Grumman won perhaps the most interesting contract award of the week, when the Defense Advanced Research Projects Agency -- DARPA -- allocated an additional $10 million to fund Northrop's work on developing critical device and integration technologies necessary to manufacture compact, high-performance electronic circuits that operate at a center frequency of 1.03 THz.
DARPA believes that this transmission frequency in particular -- the sub-millimeter radiation range of 1.03 terahertz -- will be useful in developing "advanced communication and sensor systems" such as new radar systems that can see through clouds "as effectively as today's infrared (IR) sensors operate in clear weather."
And finally, industrial conglomerate General Electric got a bit of (probably unwelcome) publicity this week, when it won a $14 million contract to supply Service Life Extension kits to the Egyptian Air Force. Egypt's been in the news a lot of late, and not exactly flatteringly so, as its ruling military-led government uses live ammunition to quell political disturbances around the country.
GE's sale doesn't directly support these activities, however. The "kits" it will be selling are used to extend the service life of GE F110 engines used to power Egyptian F-16 fighter jets.
Opportunities on the horizon
So much for the contracts that everyone knows about. Now let's move on to contracts that may not yet be incorporated into defense contractors' stock prices.
Early in the week, we learned of one such potential contract, when the Defense Security Cooperation Agency notified Congress that Australia has asked for permission to buy up to 4,002 M1156 Precision Guidance Kits from munitions maker Alliant Techsystems . These kits are used to convert basic "dumb" howitzer rounds into "smart munitions" -- projectiles that can change their trajectory in-flight, and use GPS signals to guide them to within 50 meters of their intended target.
If approved by Congress, or indeed, even if Congress simply fails to deny approval of the sale within 15 days of notification, this sale should go through, and result in $54 million in incremental revenues for ATK. It hasn't been officially announced yet, and most investors aren't factoring it into their valuations. No one knows about it -- except that now, you do.
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The article This Week in Defense: Italy's 1st F-35, and Rockets From Raytheon originally appeared on Fool.com.Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Electric, Lockheed Martin, Northrop Grumman, and Raytheon. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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