Defense News Roundup: E-Warfare, WMD, and Super Hercules Take the Stage

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). This week -- and for the first time in about a year -- the generals hit the nail right on the head: $6.2 billion in contracts awarded, almost to the penny.

And what did they get for their (read: "our") money?

Battlefield hackers
The week began on a high note for Raytheon (NYSE: RTN  ) , which won a $98 million defense contract to develop a new suite of software for electronic warfare on the battlefield. Dubbed the Electronic Warfare Planning and Management Tool, the new tool is designed to identify electronic threats, decide what types of electronic warfare will work best in a given environment, and coordinate offensive, defensive, and friendly (intra-force) electronics signals so that they don't interfere with each other.

Raytheon will be working on this project all the way through 2018, with deployment scheduled to begin in 2019.

Air Force officers survey the battlefield of the future. Source: Wikimedia Commons.

WMDs have "consequences"
In Pentagon spending terms, $98 million isn't much -- but this next contract is. On Tuesday, a team of seven defense contractors, including Northrop Grumman (NYSE: NOC  ) , Exelis, and -- you guessed it, Raytheon, too -- won the right to participate in an IDIQ contract worth $4 billion. These firms will assist the Pentagon in researching ways to prevent and roll back the proliferation of weapons of mass destruction. Just in case that doesn't work, the defense contractors will also be performing research in the ominously named field of "consequence management."


Upshot-Grable atomic bomb test, 25 May 1953. Source: Wikimedia Commons.

Is it a bird? Is it a plane? Yes, it's a plane. It's a Super Hercules
And finally, a defense contracting three-fer. Lockheed Martin (NYSE: LMT  ) won a trio of contracts for its C-130J Super Hercules transport aircraft this past week. The first award, issued Tuesday and worth $81 million, has Israel contracting to buy a single Super Herc from Lockheed, and paying for "long-lead" purchases of the parts needed to build two more. Simultaneously, Lockheed was awarded $48 million to make similar long-lead purchases preparatory to building five C-130Js for the U.S. Air Force. Then on Friday, the Pentagon came back and told Lockheed to proceed with parts stockpiling for 18 more Super Hercules for its own fleet. For this, the company will get $170 million.

So unless there's some double-counting going on here, Lockheed just landed contracts to begin or continue work on roughly 26 new planes. Not bad for a week's work.

Opportunities on the horizon
So much for the contracts that everyone knows about. Now, let's move on to a couple of contracts that may not yet be incorporated into defense contractors' stock prices.

On Thursday, we learned that the U.S. Defense Security Cooperation Agency has notified Congress of plans to upgrade the F/A-18 fighter jet fleets of two friendly nations -- Kuwait and Switzerland. Valued at $150 million and $200 million respectively, these two contracts would mean tens of millions of dollars of incremental revenue for the teams of contractors who work on them.

Speaking of which, according to DSCA, two defense contractors in particular, General Electric (NYSE: GE  ) and Boeing (NYSE: BA  ) , will be working on both projects. This is not surprising. After all, General Electric builds the F404-GE-402 turbofans that power the fighter planes. Boeing build the fighter planes themselves.

Still, the fact that these contracts have not yet been officially announced, and are not common knowledge, means that few investors are factoring them into their valuations for Boeing and GE stock right now. Simply put, no one knows about these contracts ... except that now, you do.

Thanks for all the great stock tips, Pentagon!
You don't always have to look far to find good investments. Sometimes, profiting from our increasingly global economy can be as easy as investing in your own backyard. And the Pentagon's helpful habit of publishing all its contracts daily as they're awarded certainly makes that easier for defense investors. Want to find more "easy to understand" investments? The Motley Fool's free report "3 American Companies Set to Dominate the World" shows you how. Click here to get your free copy before it's gone.


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