Defense Contracting Opportunities in Military Vehicle Refurbishment

Defense Contracting Opportunities in Military Vehicle Refurbishment

Defense Stocks Covered: Raytheon (NYSE:RTN), Northrop Grumman (NYSE:NOC), Lockheed Martin (NYSE:LMT), Boeing (NYSE:BA), AeroVironment (NASDAQ:AVAV), General Dynamics (NYSE:GD), Optex Systems (OTCBB: OPXS)

POINT ROBERTS, Wash., DELTA, B.C. –August 17, 2009 – www.HomelandDefenseStocks.com, a leading global investor and industry portal for the defense and security sector, within Investorideas.com, presents, a defense industry overview, ‘Defense Contracting Opportunities in Military Vehicle Refurbishment’, by Lisa Springer, CFA.

Defense Contracting Opportunities in Military Vehicle Refurbishment

Defense Stocks Covered : Raytheon (NYSE:RTN), Northrop Grumman (NYSE:NOC), Lockheed Martin (NYSE:LMT), Boeing (NYSE:BA), AeroVironment (NASDAQ:AVAV), General Dynamics (NYSE:GD), Optex Systems (OTCBB: OPXS)


Defense Contracting Opportunities in Military Vehicle Refurbishment

Consistent with the changes signaled in the 2010 defense budget back in April, the Pentagon has begun cancelling contracts on a number of big ticket programs covering untested technologies. A case in point is the Kinetic Energy Interceptor program. Work contracts on the KEI laser, a technology for shooting down missiles in mid-flight, have been canceled by the Pentagon. Raytheon (NYSE:RTN), a contractor on the KEI program, lost $2.4 billion from backlog because of the cancellation while backlog for lead contractor Northrop Grumman (NYSE:NOC) fell by $5.1 billion as a result.
Lockheed Martin (NYSE:LMT) experienced a $2.6 billion reduction in backlog because of the cancellation of its contracts for high-tech helicopters and Transformational Satellite Communications systems. Boeing (NYSE:BA) received a partial termination order covering the manned ground vehicle component of the Future Combat Systems (FCS) program and subsequently reduced its FCS program workforce by 30%. FCS program cuts were cited as a reason Standard and Poor’s downgraded Boeing’s debt rating in July.
Massive spending cuts in the Army’s $200 billion FCS program were a major change in the 2010 defense budget but came as a surprise to few defense industry insiders. The intent of the FCS program, with its eight ground vehicles, was to design, test and produce the next-generation of tanks, cannons and infantry carriers to augment the U.S. military’s existing fleet of Abrams tanks and Bradley and Stryker ground vehicles. Proponents argued that FCS high-tech combat vehicles would be lighter, more maneuverable and better-suited to 21st century warfare than their predecessors. When the new vehicles were tested under actual combat conditions, however, the results were disappointing. The new vehicles were indeed faster and more maneuverable, but their light armor made them too fragile. Many were quickly destroyed or severely damaged by road-side bombs. Some pieces of the FSC program, such as ground robots and unmanned drones, did perform well in combat and continue to be funded. This was good news for AeroVironment (NASDAQ:AVAV), a supplier of unmanned military drones, which was able to beat analyst estimates in fiscal 2009 and projects at least 18% revenue growth in fiscal 2010.
General Dynamics (NYSE:GD) and a few other defense contractors that support existing military vehicle platforms are emerging as winners from the 2010 defense budget.. With the development of new platforms on-hold, Abrams tanks and Bradley and Stryker ground vehicles are likely to remain in use by the U.S. military for many more years. General Dynamics designed the Abrams tank and has produced more than 8,800 M1 and M1A1 Abrams tanks since the program’s inception in the early 1980s. General Dynamics also supplies Stryker combat vehicles and to-date has delivered 2,852 of these vehicles to seven separate Army Stryker brigades. British defense contractor BAE Systems developed the Bradley ground vehicle and has supplied more than 6,700 Bradley vehicles to the U.S. military since the early 1980s.
Instead of new vehicles, the U.S. Army is investing in upgrades and refurbishments to its aging military vehicle fleet. In July, the U.S. Army Tank Automotive Command (TACOM) awarded General Dynamics a contract potentially valued at $55.2 million to refurbish 330 Stryker infantry combat vehicles. Under the terms of the contract, General Dynamics will service, repair and upgrade Stryker vehicles returning from Iraq, restore them to like-new condition and prepare them in advance of their next deployment. This refurbishment work is long overdue; the Army’s fleet of Stryker vehicles has accumulated more than six million miles of use since 2003. The July refurbishment contract covers less than 15% of the Stryker fleet, suggesting more refurbishment contacts are likely to be awarded in the future.
Defense contractor Optex Systems (OTCBB: OPXS) should also benefit from refurbishment contract awards since it supplies General Dynamics with weapon optical sighting systems. The company provides optical sighting systems for Abrams tanks and Bradley fighting vehicles and its optical systems have been selected for installation on Stryker vehicles. In July, a General Dynamics business unit awarded Optex a $3.4 million contract to supply high-tech ICWS (Improved Commander’s Weapon Station) periscopes for Abrams tanks. Optex will begin delivering the periscopes in 2011 with delivery continuing through 2012.
Its strong relationships with major defense contractors such as General Dynamics provides Optex with high visibility in the defense contracting market, as evidenced by the company’s recent invitation to participate in the 2nd Annual Heavy Vehicle Summit this September. This event is the leading forum for developers of new technologies for heavy military vehicles such as the Abrams and Bradley. New contracts such as the one awarded in July improve Optex’s order flow and backlog and helped support a greater than 50% year-over-year improvement in revenues during the fiscal nine-month period that ended this June.
Lisa Springer Bio/ Disclaimer: http://www.investorideas.com/About/Lisa-Springer-CFA/
Additional Defense articles by Lisa Springer:
Defense Budget Winners and Losers:
How Defense Companies Boeing (NYSE:BA), Northrop Grumman (NYSE:NOC), General Dynamics (NYSE:GD), Optex Systems Holdings, Inc. (OTCBB:OPXS) and others are Impacted

Optex Systems Holdings, Inc. (OTCBB: OPXS) is a featured defense stock and showcase company on Investor Ideas defense investor portals, Homelandefensestocks.com, BorderandPortsecurity.com and http://www.nationalhomelandsecurityknowledgebase.com
Visit Optex Systems Holdings, Inc. (OTCBB: OPXS) Company Profile: http://www.investorideas.com/CO/OPTEX/
About Homelanddefensestocks.com- HomelandDefenseStocks.com Portal is a global meeting place for investors and industry following defense and security, within Investorideas.com. Global visitors use the site daily to research the latest news, articles, audio, research reports and stock directories.
Defense Stocks Directory: Research global defense and security stocks http://www.investorideas.com/Companies/HomelandDefense/Stock_List.asp
About InvestorIdeas.com:
InvestorIdeas.com is a leading global investor and industry research resource portal specialized in sector investing covering over thirty industry sectors and global markets including China, India, the Middle East and Australia.

InvestorIdeas.com Disclaimer.: www.InvestorIdeas.com/About/Disclaimer.asp
Our sites do not make recommendations, but offer information portals to investors to research news, articles, stock lists and recent research. Nothing on our sites should be construed as an offer or solicitation to buy or sell products or securities. We attempt to research thoroughly, but we offer no guarantees as to the accuracy of any information presented. All information relating to featured companies is sourced from public documents and/ or the company and is not the opinion of our web sites. This site is compensated by featured companies, news submissions and online advertising. OPXS Disclosure: Optex is a featured showcase company and compensates Investorideas.com $3000 month and sixty two thousand 144 shares issued quarterly.

For more information contact: Dawn Van Zant 800.665.0411 Email: dvanzant@HomelandDefenseStocks.com
Source: HomelandDefenseStocks.com, Investor Ideas, Optex Systems Holdings Inc. (OTCBB: OPXS)

Defense Stocks News - Raytheon (NYSE:RTN) Reports Strong First Quarter Results; Increases Full-Year Guidance

Defense Stocks News - Raytheon (NYSE:RTN) Reports Strong First Quarter Results; Increases Full-Year Guidance

- Net sales of $5.9 billion, up 10 percent

- Operating income of $712 million, up 17 percent

- Earnings per share (EPS) from continuing operations of $1.11, up 21 percent

- Solid bookings of $5.2 billion; backlog of $37.9 billion

- Increased annual dividend by 11 percent to $1.24 per share, as previously announced

WALTHAM, Mass., April 23, 2009 -- Raytheon Company (NYSE: RTN ) reported first quarter 2009 income from continuing operations of $457 million or $1.11 per diluted share compared to $401 million or $0.92 per diluted share in the first quarter 2008.

"We delivered strong results across all of our businesses during the quarter," said William H. Swanson, Raytheon's Chairman and CEO. "Raytheon's strong domestic and international business and diverse portfolio of more than 8,000 programs position us well today and for the future."

Net sales for the first quarter 2009 were $5.9 billion, up 10 percent from $5.4 billion in the first quarter 2008, with growth across all of the Company's businesses.

Operating cash flow from continuing operations for the first quarter 2009 was $411 million compared to $67 million for the first quarter 2008. The increase in operating cash flow was primarily due to a $337 million tax refund received in the first quarter 2009.

In the first quarter 2009 the Company repurchased 6.8 million shares of common stock for $300 million, as part of the Company's previously announced share repurchase program. In addition, as announced in March 2009, the Company's Board of Directors voted to increase the Company's annual dividend payout rate by 11 percent from $1.12 to $1.24 per share.

The Company ended the first quarter 2009 with $87 million of net debt. Net debt is defined as total debt less cash and cash equivalents.



Summary Financial Results 1st Quarter % ($in millions, except per share data) 2009 2008 Change

Net sales $5,884 $5,354 10% Total operating expenses 5,172 4,745 Operating income 712 609 17% Non-operating expenses, net 33 16 Income from cont. ops. before taxes $679 $593 15% Income from continuing operations $457 $401 14% Income/(loss) from disc. ops., net NM of tax 3 (2) Net income(1) $460 $399 15% Less: noncontrolling interests(1) 8 1 Net income attributable to Raytheon Company(1) $452 $398 14% Diluted EPS from continuing operations(2) $1.11 $0.92 21% Diluted EPS(2) $1.12 $0.92 22%

Operating cash flow from cont. ops. $411 $67 FAS/CAS pension adjustment Inc./(Exp.) $11 $(33) Workdays in fiscal reporting calendar 61 63

(1) Raytheon Company adopted FAS No.160, Noncontrolling Interests in Consolidated Financial Statements, effective January 1, 2009. (2) Raytheon Company adopted FASB Staff Position EITF 03-6-1 for Participating Securities, effective January 1, 2009, which decreased Q1 2008 diluted EPS from continuing operations by $0.01. The impact on Q1 2008 diluted EPS was less than $0.01.

The Company adopted FAS No.160, Noncontrolling Interests in Consolidated Financial Statements, effective January 1, 2009. The Company's noncontrolling interests relate primarily to Thales-Raytheon Systems Co. LLC, which is included in the Network Centric Systems (NCS) segment. The impact to NCS in the first quarter 2009 is an increase of $8 million in operating income compared to an increase of $1 million in the first quarter 2008.

During the quarter, the Company changed the reporting of a U.K. manufacturing facility from Space and Airborne Systems to Missile Systems. Prior period segment results have been revised to reflect this reorganization.

Bookings and Backlog



Bookings 1st Quarter ($in millions) 2009 2008

Total Bookings $5,209 $6,516

Backlog Period Ended ($in millions) 03/29/09 12/31/08

Backlog $37,939 $38,884 Funded Backlog $23,022 $21,986

The Company reported total bookings for the first quarter 2009 of $5.2 billion compared to $6.5 billion in the first quarter 2008. The Company ended the first quarter 2009 with a backlog of $37.9 billion compared to $38.9 billion at the end of 2008 and $37.7 billion at the end of the first quarter 2008.

Outlook



2009 Financial Outlook Current Prior (1/29/09)

Net Sales ($B) 24.4 - 24.9* 24.3 - 24.8 FAS/CAS Pension Income ($M) 47 47 Interest Inc./(Exp.), net ($M) (105) - (115) (105) - (115) Diluted Shares (M) 398 - 401* 402 - 405 EPS from Continuing Operations $4.55 - $4.70* $4.45 - $4.60 Operating Cash Flow from Cont. Ops. ($B) 2.2 - 2.4 2.2 - 2.4 ROIC (%) 11.1 - 11.6* 11.0 - 11.5**

* Denotes change from prior guidance. ** Prior ROIC guidance now reflects a 10 bp increase due to the impact of FAS 160, Noncontrolling Interests in Consolidated Financial Statements, which the Company adopted January 1, 2009. The Company's noncontrolling interests relate primarily to Thales-Raytheon Systems Co. LLC at NCS.

The Company has increased full-year 2009 guidance for net sales, earnings per share from continuing operations and Return on Invested Capital (ROIC), and updated the outlook for diluted share count. Charts containing additional information on the Company's 2009 guidance are available on the Company's website at www.raytheon.com.
see full financials and news at www.raytheon.com







Research defense stocks with the global defense stocks directory at Investorideas.com
click here:
http://www.investorideas.com/Companies/HomelandDefense/Stock_List.asp