March '24 Defense Market Update

Defense Industry in the News: 

Recently, Congress passed a defense bill totaling $825 billion for FY 2024. The bill includes $33.5 billion to build eight ships and the allocation of funds for 86 Lockheed Martin F-35 and 24 Boeing F-15EX fighter jets as well as 15 Boeing KC-46A tankers. The bill further lays out a combined $2.1 billion for the Army’s Long-Range Hypersonic Weapon and the Navy’s Conventional Prompt Strike hypersonic weapon system. According to Bryant Harris from DefenseNews, “The bill also funds multiyear contracts to procure six critical munitions: the Naval Strike Missile, the Guided Multiple Launch Rocket System, the Patriot Advanced Capability-3, the Long-Range Anti-Ship Missile, the Joint Air-to-Surface Standoff Missile and the Advanced Medium-Range Air-to-Air Missile.”  

Per: DefenseNews  

Boeing (NYSE $BA) stock has gradually recovered from a recent slump related to internal mishaps. The share price closed at $179.79 on 5/5/24, up from a low of $159.70 on 4/25/24. The Boeing 737 Max Jet has seen two notable issues in the last few months that have worried investors about potential lawsuits and loss of long-term contract bids. Adding on to this negative news, two Boeing whistleblowers have been found dead under suspicious circumstances in the last few weeks. 

Q1 Earnings: 

General Dynamics (NYSE: GD) reported 1Q 2024 revenues of $10.7 billion, which is up 8.6% from the first quarter one year ago. Operating earnings of $1 billion were up 10.4% from the year-ago quarter, with operating margins expanding 20 basis points to 9.7% from the year-ago quarter. Diluted earnings per share (EPS) were $2.88, up 9.1% from the year-ago quarter. Total diluted EPS was reported as $2.88. “Our businesses delivered solid operating results in the quarter, growing revenue and backlog, while expanding margins, even as we awaited G700 certification,” said Phebe N. Novakovic, chairman and chief executive officer. “In the Aerospace segment, the recent FAA certification of the Gulfstream G700 has enabled us to begin customer deliveries. This is a strong start to 2024 and we remain confident in our outlook.” 

M&A and Capital Activity: 

On February 16th BAE Systems (OTCMKTS $BAESY) successfully acquired Ball Aerospace from Ball Corporation. Per BAE Systems press release, “This acquisition adds market-leading space, science and defense capabilities to the company’s portfolio of products and services through a new business called Space & Mission Systems.” 

Per: BAE Systems Press Release Feb 16th 2024 

On March 27th Honeywell (NASDAQ $HON) announced the intention to acquire the entire share capital of Civitanavi Systems S.p.A. (Civitanavi or the Company) (Euronext Milan Exchange: BIT: CNS). Honeywell will initiate a voluntary tender offer to acquire all outstanding shares of Civitanavi for a purchase price of €6.30 per share in cash (an equity value of approximately €200 million at closing). “The acquisition will further strengthen Honeywell's capabilities to help its customers create autonomous operations in aircraft and other vehicles. It also supports Honeywell’s alignment of its portfolio around three compelling megatrends, including the future of aviation and automation.” Per: Honeywell Press Release March 28th 2024