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Which Top Defense Contractor Will Win This $55 Billion Next-Generation Stealth Bomber Contract?

Next-Generation Bomber concept. Photo credit: Boeing.  

There's not a lot known about the U.S. Air Force's super-secret, next-generation Long Range Strike-Bomber, or LRS-B, project. But what we do know is enough to send pulses racing -- especially if you're a defense investor. Specifically, the Air Force plans to purchase 80-100 LRS-Bs, for an average of $550 million per unit procurement cost. 

More importantly, a win of this magnitude could be a significant boost to one -- or perhaps two -- lucky defense contractors' profits. So, the question for investors is: Who is likely to win the LRS-B contract?

The Air Force seeks bids
As I wrote before, long-range bombers like the B-52, B-1, and B-2 are iconic Air Force symbols, and provide the Air force with a capability that no other nation has -- the ability to rapidly deploy tailored effects anywhere in the world. Unfortunately, the above planes are old, and the technology is outdated. As such, the Air Force needs a replacement, and in fact, Fox News reports that Secretary of the Air Force, Deborah Lee James stated, "The LRS-B is a top modernization priority for the Air Force." 

Additionally, while the LRS-B is a classified program, USNI News reports that the LRS-B "will likely be a very long-range subsonic aircraft with broadband stealth capability designed to defeat low-frequency radars as effectively as high frequency sets." Further, it'll likely eventually be capable of delivering nuclear weapons, and have the option of being unmanned (initially it'll be manned). So, who will likely bid on this project?

A teaming of the titans
When the two top defense contractors in the world team up to win a contract, you know they're in it to win it. Specifically, Boeing (NYSE: BA  ) and Lockheed Martin (NYSE: LMT  ) have joined forces to bid on the LRS-B contract, and if they win, Boeing will be the prime, and Lockheed will be the subprime. Furthermore, besides being the top two defense heavyweights, this dynamic due has a number of things going for it.

A B-52H drops a load of M117 750lb bombs. Photo credit: USAF via Boeing.

Of all the bombers mentioned above, the B-52 is perhaps the most iconic, and it's the longest lasting (it's been flying since the 1960's) -- and it just happened to be built by Boeing. In addition, both Boeing and Lockheed have considerable experience when it comes to making planes -- just to name a few: Lockheed manufactures the C-130 Hercules, the F-35, and the P-3 Orion; while Boeing manufactures the F-18, the KC-46A Tanker, and the P-8. Obviously, this titan team is one to watch. 

The company behind the Bat Wing
While the teaming of Lockheed and Boeing presents a significant challenge to any other defense contractor hoping to win the LRS-B contract, it doesn't mean they're guaranteed to win. In fact, if anyone can challenge them it's Northrop Grumman (NYSE: NOC  ) . While Boeing built the B-52, Northrop is the company behind the B-2 stealth bomber -- the only U.S. aircraft that combines large payload, long range, and stealth in a single platform. 

B-2 in flight banking to the right. Photo credit: Northrop Grumman.

Further, when it comes to unmanned technology (an option the Air Force wants for the LRS-B) no one beats Northrop -- just to name a few, Northrop builds the Fire Scout, the MQ5B Hunter, and the incredibly impressive Global Hawk.  

Who will win?
The contract award isn't expected to be announced until spring 2015, so right now there's no way to know for certain who will win. Still, the joint forces of Lockheed and Boeing are impressive, and will be hard to overcome. That's not to say Northrop doesn't have a fighting chance -- it does -- but as of right now I'd say Boeing and Lockheed are the more likely victors. However, that could quickly change if Northrop also decides to partner with another defense giant. There's no word on it doing so yet, but considering Northrop partnered with Airbus to bid on the KC-46A Tanker, it's not outside the realm of possibilities.

Regardless of who wins, what's certain is that this contract is worth a significant amount of money -- including research and development, the total cost could exceed $80 billion -- and could be a healthy boost to the winner's bottom line. Consequently, this is something defense investors should keep on their radar.

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Read/Post Comments (5) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On July 20, 2014, at 6:22 PM, Dutchman61 wrote:

    It does not matter where this goes right now, there is no money. it must also be said that of the three current bombers, the least effective is the B-2. It is almost impossible to keep in the air. The B-52 BUFF's fly missions all the time and are easily turned around for the next, often getting mechanical repairs in the time it takes to refuel and rearm. they are designed for field service. The B-1 Lancers are also field serviceable and can carry more bombs then the BUFFs and are faster. With engine improvements they are rated as Mach 1.1 speeds. They are more fuel efficient than the BUFFS, but both have proven to be huge standoff assets in Afghanistan and Iraq. The B-1's also have about 10% of the radar profile of the BUFFS which in a radar sense are flying barns. They are also 24 years younger (the average age of crewmen). Then there is the B-2. The Air Force has dodge the reliability issue for years but most aviation sources say the plan needs up to 20 hours of service for every hour in the air. They can only be service in specially equipped hangers which exist at their home fields, one in England, and one in Asia. they carry half the bomb load of the B-1 in conventional weapons and their service over Iraq and Afghanistan is mixed. Troops reported that B-2's missed far more targets than they hit while the B-1 was very reliable for bombs on targets. And there is another fact that never gets attention. The Russians never threw away anything and they had old 1950's era radar still in service when the B-2 was unveiled. To their surprise, the old systems tracked the B-2 as easily as the BUFF's. The newer weapons system radars could not find it but by accident they found the B-2's achilles heel. With a slow speed, no defensive ability, and limited flight ability, the B-2 was and still is a sitting duck for those who know how to find it. What is the value of a hyper expensive plane when the enemy can see and kill it using old fashion technology that costs literally nothing?

  • Report this Comment On July 20, 2014, at 7:00 PM, Tyeward wrote:

    I think what we really need is a stealth bomber capable of supercruise and ultra long haul ability with defense capabilities beyond shooting chaff. A stealth bomber is a good idea, however that does not mean sacrificing performance in favor of stealth. When certain stealth generations become obsolete, you have to at least give them a fighting chance in a bad situation and that is performance. They should both go hand in hand.

  • Report this Comment On July 20, 2014, at 8:24 PM, TheAncient wrote:

    Stealth aircraft require special environmentally controlled hangers for when they are on the ground. Stealth will be obsolete within the next 5 10 years. The BUF has been operational since the mid 1950's and the Air Force wants them around until the mid 21st century even though 99.9% of the small pieces and parts suppliers have been out of business for several decades.

    This 'new' stealth bomber is just a money maker for the military industrial complex. The Pentagon will spend a billion or two then change their minds about the 'new' bomber. When that group of Generals and Admirals, who approved the new bomber, retire and go to work for the military industrial complex their replacements will scrap the idea for one of their own. And so it begins again. Keep in mind that Generals and Admirals are promoted to that rank and above by civilians, namely Congress and not the military.

    I'm no sure the B1B is still on active duty. It had/has 'issues'.

  • Report this Comment On July 20, 2014, at 10:17 PM, TMFDitty wrote:

    Yes, the B-1B is on active duty. And yes, it has issues.

  • Report this Comment On July 20, 2014, at 11:24 PM, peterwolf wrote:

    Who will win?? Answer: None. Because it will never get built. This is another Pentagon pipe dream imagining that the American public still cares about its own national defense. Well, it no longer does. This is evident by its continued support of liberal politicians who run on an explicit platform of unilateral military disarmament.

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Katie Spence

Katie Spence has been a financial journalist for The Fool since 2011. She specializes in defense companies, “green" technology, autos, and robots. Follow her on Twitter for breaking news in the defense, auto, and robot industry.

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