Defense News Roundup: Lockheed's Aegis Missile Defense Award Approaches the $1.8 Billion Mark

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

Rich Smith
Rich Smith
Apr 13, 2014 at 10:00AM

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.

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.) So far this year, the Pentagon has announced contracts worth approximately $39.95 billion, including $3.17 billion awarded through Thursday last week.

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

"Star Wars" on Earth
In a relatively lucrative week for contractors, small-dollar-value contracts were arguably among the most interesting contracts awarded last week. Among these was a small win for the Navy's Aegis Ballistic Missile Defense system, which over the decades since its creation has morphed from a system primarily dedicated to shooting down hostile aircraft, into a super-system capable of shooting down incoming intercontinental ballistic missiles.

Last week, the Pentagon awarded Lockheed Martin (NYSE:LMT) $14 million to "identify technology" to make further upgrades to Aegis BMD (as the robust, anti-ICBM version is called). In total, Lockheed's BMD contract is now worth nearly $1.8 billion. In related news, Lockheed also won $45 million in funding to supply the U.S. Navy with an unspecified number of Aegis Weapon System MK 7 equipment sets.

Couldn't you just wet a finger and hold it up?
Another interesting win for Lockheed came on Tuesday, when the Pentagon awarded the company a $9 million contract to develop an "affordable, rugged, set-and-start" ground-based wind "profiler." When completed next year, Lockheed's new device is expected to precisely measure wind speeds and vectors at supply drop sites. The idea being that this will assist airplanes and helicopters making parachute supply drops to troops at forward operating bases to more accurately time their drops, ideally resulting in deliveries arriving within 50 meters of where they're aimed at.

Anything good on the radio?
Of course, the big news of the week came Wednesday, when the Pentagon announced a $988 million contract to have defense contractors Exelis (UNKNOWN:XLS.DL), General Dynamics (NYSE:GD), Harris Corp (NYSE:HRS), and Thales Defense build it thousands of Soldier Radio Waveform, or SRW, Applique Radio Systems. These single-channel radios will be used by Army Brigade Combat Teams to better communicate with the Army's larger tactical communications network.

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

On Monday, we learned that the U.S. Defense Security Cooperation Agency has notified Congress of plans to sell the Government of South Korea a package of about 100 Sidewinder air-to-air missiles from Raytheon (NYSE:RTN). These will include 24 "CATM" rounds (dummy missiles used on fighter pilots' training missions) and 76 live rounds. DSCA puts the value of this sale at $98 million.

This contract hasn't been officially announced. For now, few investors are factoring it into their valuations of the company. Very few people know about it -- except that now, you do.