Defense stocks showed strength Tuesday after the Department of Defense doled out a number of high-value contracts to defense companies late last week. The U.S. Navy awarded General Dynamics a $5.1 billion contract modification as it builds out the next generation of battle submarines. Meanwhile, Lockheed Martin won a $1.05 billion contract to speed up F-35 fighter jet production. And Boeing received a $497 million contract for helicopter production.
The awards coincide with Friday's signing into law by President Biden the $847 billion National Defense Authorization Act. The bill, which enjoyed strong bipartisan support in Congress, was $45 billion more than the defense budget proposed by the White House, and a 10% increase over the 2021 defense spending levels.
Defense Stocks: General Dynamics Submarine Contract
General Dynamics Electric Boat, the Naval engineering subsidiary of defense contractor General Dynamics, received a $5.1 billion contract modification on Dec. 21. The company originally secured the $9.5 billion submarine contract in November 2020.
General Dynamics Electric Boat designs, builds, repairs and modernizes nuclear submarines and ships for the U.S. Navy. It's constructing the new Columbia class of submarines, which will replace the aging Ohio class of ballistic missile submarines. The $5.13 billion will advance construction and procure critical components to support the buildout of the next five ships in the class, General Dynamics says.
The Columbia class submarines will measure 560 feet long and displace roughly 21,000 tons, making them the largest ever built by the U.S.
The first two submarines, The District of Columbia and the Wisconsin, are currently under construction. And Electric Boat will deliver the lead ship to the Navy in 2027, with the contract set to be completed by October 2030.
Among defense stocks Tuesday, General Dynamics rose about 0.3% Tuesday and is up about 1.3% in the days following the announcement. Shares are up about 13% over the last three months and with a 19% gain so far this year.
Lockheed Martin F-35 Contract
Lockheed Martin received a $1.05 billion contract from the Department of Defense on Dec. 23, to advance F-35 fighter jet production. Lockheed Martin is currently working to deliver 118 Lot 18 F-35 Lightning II fighter jets by January 2024. The contract will be used to ensure on-time production and delivery, the DOD says.
The Lot 18 aircraft are used by the Air Force, Navy, Marine Corps, as well as foreign military sales customers and U.S. allies. Lockheed Martin also received a $431 million contract earlier this month to deliver High Mobility Artillery Rocket Systems to support the U.S. Army and its allies.
Lockheed Martin stock rose 0.4% on Tuesday. Shares are up 20% over the last three months and 37% through 2022.
Boeing Helicopter Contract
Additionally, Boeing received a $497 million firm-fixed-price contract to produce CH-47F helicopters for the Army. The work locations and funding will be determined with each order, the Department of Defense says. And the contracted has an expected completion date for Dec. 30, 2025.
BA stock rose about 0.2% on Tuesday after gaining 1.3% early in the day. Shares are up 11% this month after United Airlines announced on Dec. 13 that it's buying 100 787 Dreamliners. The deal marks the largest Dreamliner order in company history.
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