POCASSET, Mass., July 23, 2025 (GLOBE NEWSWIRE) -- A joint team from HII (NYSE: HII), Woods Hole Oceanographic Institution (WHOI), and U.S. Navy’s Naval Undersea Warfare Center Division Newport (NUWCDIVNPT) recently completed a major milestone in advancing the U.S. Navy Submarine Force’s initiative to launch and recover autonomous undersea vehicles from submarine torpedo tubes. A test by the joint team confirmed the compatibility of the REMUS 620 with the SAFECAP, Virginia-class submarine weapons handling ...

Investment Case for Lockheed Martin - The investment case for Lockheed Martin is supported by the ongoing need for defense equipment and services, particularly in the context of geopolitical conflicts and increasing defense budgets, including a proposed record U.S. defense budget of $1.01 trillion [1] - Lockheed Martin specializes in missile defense and tactical missiles, aligning with U.S. spending priorities [2] - The company has a significant backlog of $173 billion, equating to 2.3 years of sales based on management's guidance for 2025 revenue, with the U.S. government as a reliable customer [2] Valuation Metrics - Management's guidance indicates earnings per share of $23.15 and free cash flow of $6.7 billion, leading to valuations of 17.2 times earnings and 16.3 times free cash flow, which are attractive given the company's growth prospects [3] Execution Challenges - Lockheed Martin faces execution challenges, particularly highlighted by the Department of Defense's decision to reduce F-35 procurement, focusing instead on making existing F-35s mission-capable [4][5] - The F-35 program has experienced significant cost overruns and delays, impacting confidence in Lockheed Martin's ability to grow margins [5][9] - The loss of the next-generation air dominance contract to Boeing is also attributed to issues with the F-35 program [6] Long-term Defense Spending Concerns - There are concerns regarding the sustainability of long-term government spending on defense, especially in light of rising U.S. public debt to GDP ratios [7][9] - The ability to predict future global defense priorities remains uncertain, which could impact defense spending [10] Overall Assessment - While defense stocks may appear undervalued, Lockheed Martin's specific issues with the F-35 may limit its attractiveness as an investment for significant long-term returns [11]

Key Takeaways LMT secures a $197.5M Navy contract for sonar system design, development and production support. Work under the deal will be done primarily in Manassas, VA; and Clearwater, FL, through September 2026. LMT continues to benefit from rising global demand for advanced sonar and anti-submarine technologies.Lockheed Martin Corporation’s ((LMT) unit, Rotary and Mission Systems, recently clinched a modification contract to provide engineering design, development and production support for Sound Navi ...

Core Viewpoint - General Dynamics Corporation's Electric Boat unit secured a $986.8 million modification contract for Columbia Class submarines, enhancing its position in the defense sector [1][2][8]. Group 1: Contract Details - The contract, valued at $986.8 million, is expected to be completed by December 2031 and includes component development, class lead yard support, and enhancements for the Submarine Industrial Base [2]. - Most of the work will be executed in Groton, Connecticut [2][8]. Group 2: Industry Growth Prospects - Global military conflicts and national security concerns are driving investments in submarine fleets, with a forecasted compound annual growth rate of 7.6% for the global submarine market from 2025 to 2030 [3][4]. - General Dynamics, as a key contractor in the submarine market, is well-positioned to benefit from this growth, particularly through its Electric Boat division [4]. Group 3: Opportunities for Other Defense Players - Huntington Ingalls Industries (HII) is involved in producing Columbia-class and Virginia-class submarines, with a long-term earnings growth rate of 11% and a projected 3.3% sales growth for 2025 [5][6]. - BAE Systems, a primary manufacturer of the Astute-class nuclear submarines, has a long-term earnings growth rate of 13.4% and a projected 62.6% sales growth for 2025 [6][7]. - Northrop Grumman Corporation provides missile launch systems for naval submarines, with a long-term earnings growth rate of 3.3% and a projected 2.8% sales growth for 2025 [7][9]. Group 4: Stock Performance - General Dynamics' stock has decreased by 1.1% over the past month, contrasting with the industry's 1.1% growth [10].

Market Overview - The U.S. stock market is expected to experience volatility due to rising tensions between Israel and Iran, which have led to increased oil prices and concerns about a broader regional conflict [1] - Uncertainty surrounding the Federal Reserve's interest rate decisions amid these geopolitical risks is adding further pressure to the market [1] Investment Strategy - A curated portfolio of low-beta stocks is recommended as a strategy to navigate the uncertain market conditions [2] - Low-beta stocks such as VirTra Inc. (VTSI), Franco-Nevada Corporation (FNV), Elbit Systems Ltd (ESLT), and Philip Morris International Inc. (PM) are highlighted as potential investment opportunities [2] Stock Characteristics - Beta is a measure of a stock's volatility compared to the market, with a beta of 1 indicating movement in line with the market, greater than 1 indicating higher volatility, and less than 1 indicating lower volatility [3][4] - Stocks with a beta between 0 and 0.6 are screened for lower volatility, alongside other criteria such as positive price movement over the last month, average trading volume greater than 50,000, a price of at least $5, and a Zacks Rank of 1 (Strong Buy) [5][6] Company Insights - **VirTra Inc. (VTSI)**: The company is benefiting from the U.S. Army's Integrated Visual Augmentation System (IVAS) project, which enhances training for soldiers and positions VirTra favorably for military contracts [7][9] - **Franco-Nevada Corporation (FNV)**: Recently invested $1.05 billion in a royalty on the Côté Gold Mine, which is expected to close by Q2 2025, indicating strong revenue potential from significant gold resources [9][10] - **Elbit Systems Ltd (ESLT)**: The company has a substantial backlog of $23.1 billion, with 66% of its contracts coming from international markets, reflecting strong global demand for defense solutions [9][11] - **Philip Morris International Inc. (PM)**: Transitioning from traditional cigarettes to smoke-free products like IQOS and ZYN, while focusing on shareholder returns and cost-cutting measures [12]

Investment Rating - The report maintains a bullish outlook on the KR Defense sector, particularly highlighting Hyundai Rotem and Hanwha Aerospace as key players with strong order momentum and growth potential [1][4][5]. Core Insights - Hyundai Rotem is expected to announce a significant Poland EC2 contract valued at approximately $6 billion, which includes 180 K2 tanks and local production initiatives [4]. - Hanwha Aerospace has secured an L-SAM II project order worth W199 billion, enhancing its capabilities in Korea's air defense systems [5]. - Hitachi's recent investor day revealed a net debt/EBITDA leverage of 1-2x and a return on invested capital (ROIC) of 12-15%, indicating a stable financial position [1]. Detailed Highlights - **KR Defense**: Hyundai Rotem's anticipated Poland EC2 orders are a strong catalyst for growth, with investor confidence reflected in recent share price rallies [4]. Hanwha Aerospace's order win for the L-SAM II project and the approval of the Austal acquisition position it well for future projects [5]. - **Japan Auto**: Hino Motors and Mitsubishi Fuso have finalized a merger agreement with Toyota and Daimler, aiming to create synergies in the commercial vehicle segment [6]. Stanley Electric's guidance for FY25 was weaker than expected, but a large-scale share buyback was announced [6]. - **Mitsubishi Electric**: The company is focusing on digital transformation and has allocated a new M&A budget of ¥1 trillion to support its business model transformation [8]. Sector Key Newsflow - The J.P. Morgan EU Industrial Conference highlighted strong interest in electrification, data centers, and defense sectors, indicating a shift in investor focus [5][7]. - The merger between Hino and Mitsubishi Fuso is expected to yield significant benefits despite potential dilution from new share issuance [6]. - Investors are cautiously optimistic about the Asia FA & Robotics sector, with expectations of limited downside amid potential trade deals between China and the US [10]. Catalyst Calendar - Key upcoming events include the Hitachi Investor Day and the launch of the Xpeng G7 SUV, which are expected to attract significant investor attention [15].

Investment Rating - The report does not explicitly state an investment rating for the industry or specific companies covered. Core Insights - The impact of China's rare-earth export ban is significant, affecting key Asian automakers like Suzuki and Ford, with production halts reported [1][5] - The sentiment around BYD has improved, with investors noting a bottoming out in sentiment, while concerns remain for Geely and Great Wall Motor [1][12] - The Indian defense sector is poised for growth, with expectations to increase defense spending to 2.5% of GDP by FY30, indicating a potential doubling of defense spending [1][11] - The EU building materials sector is showing signs of improvement, driven by positive factors such as increased defense spending and a potential recovery in residential construction [1][13] Detailed Highlights - **Japan Auto**: Suzuki halted production of its Swift model due to the rare-earth export ban but resumed operations shortly after, indicating that the situation may not be as severe as initially thought [1][5] - **China Auto Feedback**: Pricing competition has moderated, and BYD's sales volume has responded positively without significant price cuts, improving investor sentiment [1][10][12] - **Indian Defense**: The Ministry of Defense's commentary suggests that conditions are aligning for a significant increase in defense spending, attracting investor interest in various defense companies [1][11] - **EU Building Materials**: The sector is experiencing a strong move, with cement shares leading the way, supported by positive results from companies and a firming sentiment for construction recovery [1][13] Sector Key Newsflow - US auto suppliers are urging immediate action to address China's rare earth restrictions [1][13] - Suzuki's production of the Swift is set to return to normal from June 16 [1][13] - Chinese officials have summoned EV executives to discuss self-regulation in the ongoing price war [1][13] - BYD plans to nearly triple its dealer network in South Africa, reflecting its growth strategy [1][13] - China's NEV retail sales increased by 30% year-on-year in May, indicating strong market demand [1][13]

Core Viewpoint - L3Harris Technologies, Inc. (LHX) reported strong adjusted earnings for Q1 2025, exceeding expectations, but faced revenue challenges due to divestitures and segment performance variations [1][3][11]. Financial Performance - Adjusted earnings per share for Q1 2025 were $3.47, surpassing the Zacks Consensus Estimate of $2.32 by 3.9% and increasing 7.1% from $2.25 in the previous year [1]. - GAAP earnings were reported at $2.04 per share, up from $1.48 in the prior-year period [1]. - Total revenues for L3Harris were $5.13 billion, missing the Zacks Consensus Estimate of $5.23 billion by 1.9% and down 1.5% from $5.21 billion year-over-year [3]. Segmental Performance - Integrated Mission Systems reported net revenues of $1.59 billion, a 2% decline year-over-year, but operating income increased to $203 million from $185 million, with an operating margin of 12.8% [4][5]. - Space and Airborne Systems had net revenues of $1.61 billion, an 8% decline year-over-year, with operating income dropping to $176 million and an operating margin of 10.9% [6]. - Communication Systems saw a 4% increase in net revenues to $1.35 billion, with operating income improving to $345 million and an operating margin of 25.5% [7]. - Aerojet Rocketdyne reported revenues of $629 million, an 8% year-over-year increase, but operating income slightly decreased to $76 million with an operating margin of 12.1% [8]. Financial Position - As of March 28, 2025, L3Harris had $517 million in cash and cash equivalents, down from $615 million as of January 3, 2025 [9]. - Long-term debt decreased to $10.98 billion from $11.08 billion [10]. - Adjusted free cash flow for Q1 2025 was $72 million, down from $156 million in the same quarter of 2024 [10]. 2025 Guidance - L3Harris updated its revenue guidance for 2025 to a range of $21.40-$21.70 billion, lower than the previous guidance of $21.80-$22.20 billion [11]. - The company expects adjusted earnings to be in the range of $10.30-$10.50, with the consensus estimate at $10.57 per share [12]. - The adjusted segment operating margin is anticipated to be in the mid-to-high 15% range, with expected adjusted free cash flow between $2.40 billion and $2.50 billion [12].

Group 1: Lockheed Martin - Lockheed Martin has a record backlog of $176 billion, representing 2.4 years of sales based on 2025 guidance [4] - The company has a book-to-bill ratio of 1.2 times in 2024, indicating strong order momentum across all business areas [5] - Management expects mid-single-digit sales growth in 2025, with earnings per share guidance of $27-$27.30, comfortably covering the dividend per share of $13.20 [5] - Lockheed Martin's customers are primarily governments, ensuring reliable demand even during economic slowdowns [8] Group 2: Air Products & Chemicals - Air Products has increased its dividend for over 43 consecutive years, with a forward dividend yield of 2.4% [9][11] - The company has a strong infrastructure, including 1,800 miles of industrial gas pipeline and over 750 production facilities, creating high barriers to entry [10] - Air Products has achieved an approximately 8% compound annual growth rate in dividends from 2014 to 2025, with a payout ratio averaging 61% over the past five years [11] - The stock is currently trading at 17 times trailing earnings, below its historic P/E of 27, making it an attractive option for passive income [12] Group 3: FedEx - FedEx reported adjusted revenue of $22.2 billion, a 2.3% increase year-over-year, but has faced challenges with a poor near-term outlook [13] - The company has lowered its full-year guidance, projecting adjusted earnings per share of $18 to $18.60, which is below previous forecasts [14] - Despite near-term challenges, FedEx offers a dividend yield of 2.3%, comparable to well-known dividend stocks like Procter & Gamble and McDonald's [17] - The dividend payout of $5.52 per share is less than a third of its earnings guidance, indicating a safe payout ratio [18] - FedEx is considered a value stock for long-term investors with a three to five-year investment horizon [19]