Zacks Industry Outlook Highlights: Lockheed Martin, The Boeing Company and Northrop Grumman

CHICAGO--(BUSINESS WIRE)--Today, Zacks Equity Research discusses the Aerospace & Defense industry, including Lockheed Martin Corporation (NYSE: LMT), The Boeing Company (NYSE: BA) and Northrop Grumman Corp. (NYSE: NOC).

A synopsis of today’s Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/37745/Aerospace+and+Defense+Review+-+July+2010

Lockheed Martin Corporation (NYSE: LMT) is the biggest recipient of U.S. defense contracts followed by The Boeing Company (NYSE: BA) and Northrop Grumman Corp. (NYSE: NOC). With the wars in Iraq and Afghanistan expected to wind down in the coming years, core defense spending is also expected to follow that trend. In response to this situation, the big operators will most likely target mergers and acquisitions (M&A) 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. Major industry players have, in response, resorted to bolt-on acquisitions to plug holes in their product offerings.

Boeing has been particularly active on this front, having acquired Argon ST, a premier developer of intelligence equipment. Boeing also acquired Narus, a provider of real-time network traffic and analytics software used to protect against cyber attacks and persistent threats aimed at large Internet Protocol networks.

These defense operators are also entering into strategic alliances and partnerships with competitors to improve their prospects to land major contracts. Recently, Boeing and Northrop Grumman announced a strategic partnership to pursue the competitive development and sustainment contract for future work on the Ground-based Midcourse Defense (GMD) system for the U.S. Missile Defense Agency (MDA).

The long-delayed $35 billion contract from the U.S. Air Force for aerial tankers remains a major hope for the defense industry. Boeing and Airbus are two major competitors for the contract and a decision from the department is expected later this year.

Outside of defense, the return of demand in commercial airlines remains a major positive for the industry, with Boeing increasing production of 737 twice to meet the expected higher demand around 2012. Boeing has secured a big order from Air China for jetliners.

The International Air Transport Association recently forecast that the global industry would make a profit of $2.5 billion this year, after a huge loss of $9.4 billion in 2009, a marked improvement from its predictions late last year of more losses this year.

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