Newsflash: May is done, and whether you knew it or not, June is the month you've been waiting for. At least, it is if you own shares of any of the several defense contractors bidding for a piece of the $70 billion contract to build the Army's next Humvee.
To recap, here are the major players:
- Lockheed Martin (NYSE: LMT ) , along with Armor Holdings (now owned by Britain's BAE Systems) and Alcoa.
- BAE again, teaming up in its own right with Navistar.
- Boeing (NYSE: BA ) , along with Textron.
- Force Protection (Nasdaq: FRPT ) and DRS Technologies (NYSE: DRS ) .
- General Dynamics (NYSE: GD ) and AM General (maker of the current Humvee).
- And most recently, Northrop Grumman (NYSE: NOC ) and Oshkosh (NYSE: OSK ) .
As you may recall, this contest got started in earnest back in February, when the U.S. Army issued an invitation for proposals from the major players. Those bids were due April 1. The next step is for the Pentagon to choose two or more teams of contractors to produce seven Joint Light Tactical Vehicle (JLTV) prototypes, and four prototype trailers to be dragged behind them.
Once chosen, the luckier contestants will have 27 months to prepare their offerings, due for submission in September 2010. As for the $70 billion this program is supposed to cost, you can expect the bulk of that revenue won't begin flowing until the JLTV is rolled out en masse beginning in 2012.
So why are we worrying about this now?
Basically, I'm just giving you a heads-up. Sometime over the next four weeks, as many as four of the six contestants named above are going to be asked to "leave the island." Once it becomes known that they're out of the running for a contract this huge, you can expect their stocks to take a hit. Contrariwise, at least two teams could get a really big bump sometime next month when the Army greenlights their prototype projects.
Were I a betting man, I'd vote General D and AM General as most likely to succeed in June. AM General's position as the historical maker of the Humvee gives it pole position in this race. I'd pick BAE/Navistar for second place, based on these companies' remarkable success in winning Mine Resistant Ambush Protected (MRAP) vehicle contracts in recent months.
But that's just my opinion. I could be wrong. Invest accordingly.
Learn everything you ever wanted to know, and maybe even a little bit that you didn't, about the JLTV program in: