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Biden Defense Budget Focuses on R&D, Cuts Some Mainstay Programs

By Lou Whiteman - May 28, 2021 at 4:51PM

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There were surprising winners and losers among contractors.

The Biden Administration's first Pentagon budget submission slashed defense procurement by 6% to $133.6 billion, and picks winners and losers among some high-profile programs.

On Friday, the White House requested $715 billion for the Pentagon in the government's fiscal 2022. The budget proposes $112 billion for research and development, the largest total on record in that area, and an $8 billion decline to $133.6 billion for new equipment.

Aerial view of the Pentagon.

Image source: Getty Images.

Among individual programs, Lockheed Martin (LMT 1.26%) got an unexpected boost with the Pentagon upping F-35 Joint Strike Fighter research and modifications to more than $2 billion, from $1.5 billion last year. Northrop Grumman (NOC 1.97%) also saw a $1 billion uptick in funding for the Ground Based Strategic Deterrent, a massive program to replace the aging Minuteman intercontinental ballistic missiles.

Spending on Army radios also got a boost, which should benefit L3Harris (LHX 2.36%).

Among the disappointments, the Pentagon did not request any funds for Boeing (BA 1.26%)-made F-18 Super Hornet jets or P-8 planes. And spending on land equipment, including tanks, also is forecasted to fall -- a hit to General Dynamics (GD 2.64%).

The budget request is submitted to Congress, which will now use it as a framework for a final spending bill. In years past, Congress has tended to boost spending on large programs, meaning it is possible some of the totals could be higher and the lost business restored in the months to come.

Lou Whiteman owns shares of General Dynamics, L3Harris Technologies, and Lockheed Martin. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Lockheed Martin Corporation Stock Quote
Lockheed Martin Corporation
$434.24 (1.26%) $5.39
The Boeing Company Stock Quote
The Boeing Company
$169.99 (1.26%) $2.11
Northrop Grumman Corporation Stock Quote
Northrop Grumman Corporation
$479.58 (1.97%) $9.27
L3Harris Technologies, Inc. Stock Quote
L3Harris Technologies, Inc.
$236.74 (2.36%) $5.45
General Dynamics Corporation Stock Quote
General Dynamics Corporation
$237.95 (2.64%) $6.13

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