Defense News Roundup: Lockheed Martin Is Watching You, and Sikorsky Takes on the Drug Cartels

Here's our weekly rundown of the major stories in defense spending.

Jun 28, 2014 at 8:00AM

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.

G

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 2014. A further $5.6 billion a week goes to pay the salaries and benefits of U.S. servicemen and servicewomen. This past week's total value of contracts awarded -- $6.155 billion -- was therefore almost the exact definition of an "average week" of spending at the Pentagon.

And what did the generals get for their (read "our") money?

File
SBIRS satellite. Photo: Wikimedia Commons

Big Brother is watching you (from way, way up)
The biggest contract awarded this past week went to the nation's biggest pure-play defense contractor, Lockheed Martin (NYSE:LMT). Winning a contract "modification" worth $1.86 billion, Lockheed has been given the go-ahead to finish up its work building the fifth and sixth Geosynchronous Earth Orbit, or GEO, satellites to be deployed as part of the U.S. Air Force's Space Based Infrared System (SBIRS).

The SBIRS constellation of satellites is tasked primarily with giving the U.S. early warning of missile launches from Earth, but its "global, persistent, infrared surveillance" is also useful for enhancing "battlespace awareness" to U.S. forces on the ground. Including work on ground operations and data processing, Lockheed will continue working on these sats through at least Sept. 30, 2022.

Hail, CSAR!!
The week's technically second-biggest award -- but potentially its largest -- went to United Technologies (NYSE:UTX), which, on Thursday, won the Air Force's long-anticipated Combat Rescue Helicopter contract.

Valued at $1.28 billion initially, this contract hires UTC's Sikorsky unit to begin development of a new Combat Search-And-Rescue (CSAR) helicopter to replace the HH-60G Pave Hawk's in use by the Air Force today. Over the course of the next five years, UTC will be asked to build as many as 112 of the new CSAR helicopters for an anticipated final cost of $7.9 billion.

Pave Hawk

HH-60G Pave Hawk, the U.S. Air Force's current combat rescue helicopter. Photo: Wikimedia Commons.

"Fat?" Nah... just a little Husky
Moving rapidly downscale in contract size, we come next to Britain-based defense contractor Chemring Group (LSE:CHG), which, on Monday, won a smallish $26.1 million contract from the U.S. Army. Reminding us that combat operations in Afghanistan and Iraq are far from finished (as if we needed the reminder with Iraq back in the headlines), the subject matter of this contract was -- IEDs.

Chemring's NIITEK subsidiary (short for Non-Intrusive Inspection Technology) will be supporting the Husky Mounted Detection System, a tractor-borne contraption capable of sending ground-penetrating radar into the earth to discover deeply buried mines and improvised explosive devices, so that they can be safely cleared. NIITEK will be doing engineering work on Husky for 21 months initially, and may be asked to begin a 15-month period of low-rate initial production of the devices thereafter, receiving additional funds for such work.

Opportunities on the horizon
So much for the contracts that everyone knows about. Now, let's end this week's round-up with one contract that may not yet be incorporated into defense contractors' stock prices.

On Tuesday, we learned that the U.S. Defense Security Cooperation Agency has notified Congress of plans to sell the Government of Mexico a flight of five new UH-60M Black Hawk helicopters from United Technologies. Designed to bolster Mexican law enforcement's efforts to combat "organized crime and drug trafficking organizations" in the country, these helicopters will be equipped with advanced military gear, including infrared radar systems from FLIR Systems (NASDAQ:FLIR), and also 10 7.62mm machine guns -- two apiece.

If this sale is approved by Congress, these helos will join 18 other Black Hawks that the Mexican government previously asked to be sold to it in April. At present, Mexico is known to have only seven UH-60 helicopters (and their civilian S-70 variants) in its arsenal. This year's orders will more than quadruple the size of the country's fleet.

This last contract hasn't yet been officially announced. For now, few investors are factoring it into their valuations for United Technologies. Very few people even know about it -- and now you're one of them.

Thanks for all the great stock tips, Pentagon!
Now here's another one: Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour. (That's almost as much as the average American makes in a year!) And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers