CHICAGO, Aug. 31, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Aerospace & Defense, including Lockheed Martin Corporation (NYSE: LMT), The Boeing Company (NYSE: BA), Northrop Grumman Corp. (NYSE: NOC) and General Dynamics (NYSE: GD).
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A synopsis of today's Industry Outlook is presented below. The full article can be read at
http://www.zacks.com/stock/news/59948/Aerospace+and+Defense+Stock+Outlook+-+August+2011
Defense spending is the major source of revenue for the top nine global aerospace companies. But with the U.S. government expected to institute greater austerity in its defense budget going forward, defense companies will need to source more orders from global clients. The geostrategic significance of the industry and the related heavy export restrictions will come in the way, to some extent, of those marketing efforts by U.S.-based operators.
OPPORTUNITIES
Lockheed Martin Corporation (NYSE: LMT) was the biggest recipient of U.S. defense contracts in 2010 with orders worth $35.9 billion, followed by The Boeing Company (NYSE: BA) and Northrop Grumman Corp. (NYSE: NOC). The big operators, in order to counter the expected defense budget cuts, will most likely target mergers and acquisitions to bolster their operating prospects.
At the macro level, a gradual shift in defense spending patterns can be discerned. In response to the asymmetric terrorist threats, the emphasis appears to have shifted to high-tech intelligence equipment, replacing demand for conventional big guns and heavy armor. The major industry players have, in response, resorted to bolt-on acquisitions to plug gaps in their product offerings.
Acquisitions
The U.S. defense companies went on an acquisition spree in 2010, with 255 completed transactions in the year, worth $24 billion. The acquisition spree has carried into 2011, possibly eclipsing the previous year's level. The U.S. Defense department also endorses mergers among U.S. defense companies, provided they don't involve the top five or six suppliers acquiring each other.
Boeing has been particularly active on this front, having acquired Argon ST, a premier developer of intelligence equipment, Narus, a provider of real-time network traffic and analytics software, and CDM Technologies, a software engineering company that specializes in real-time transportation and logistics planning systems for the U.S. military. Recently, Boeing completed the acquisition of Solutions Made Simple Inc., an information services provider for the U.S. government and the Intelligence Community.
Another defense operator General Dynamics (NYSE: GD) decided to acquire Fortress Technologies, Inc., which has expertise in providing secured wireless networking equipment for the U.S. military and other government customers. The company also acquired Network Connectivity Solutions, Corp., a provider of enterprise services and cloud computing to the U.S. Department of Defense (DoD).
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