February 26, 2007: Aero Defense, USCG Deepwater program

Here are some of the highlights regarding recent contracts:

The USAF has submitted a $17B wish list to Congress. The unfunded items include $2.6B for aircraft modernization and monies for 20 C-130Js. Big winner here is Northrup Grumman (NOC).

USCG Deepwater program is presently being restructured. There have been problems from the onset with this ambitious multi-multi-multi-billion dollar program.
Several whistle blowers have made allegations (on You Tube and elsewhere) as to quality and security problems covering a range of issues. Officially, these issues are being either addressed or dismissed as sour grapes. Realistically, the program to modernize the USCG and to appropriately address its role in homeland security is already past due. Some Coast Guard ships are almost fifty years old and hopelessly outdated and inefficient to operate. Coast Guard personnel are doing a fabulous job maintaining some semblance of border and high seas security, in addition to their search and rescue efforts and drug enforcement responsibilities. The BIG WINNER in this Deepwater Program is Lockheed Martin (LMT). It is very likely that the Democratic Congress will fully fund the Deepwater program, as it is an integral part of the long term Homeland Security Department's border security role.

British Airways has ordered four Boeing 777s at $1.6B.

Virgin Blue is expected to close a deal for seven Boeing 777.

Meanwhile, Airbus wants to sell its SAS plant. So far, no takers. Good going, Airbus.

Japan Air has ordered 10 ERJ-170s, dealing a big blow to Canada's Bombardier, who had hoped to penetrate the fast growing Asian market for business jets.

MRAP awards are presently being issued to several companies. Oshkosk )OSK) and the General Dynamics (GD)/Force Protection (FRPT) jv seem to be getting the lion's
share.

Reuters reports that Dyncorp(DYN) has won the F-16 support deal from the UAE.

Northrup-Grumman (NOC) has the inside track be awarded the $8.6B contract to manage the Lawrence Livermore Labs (seven year deal). To be announced in early March.

Recommended stocks:

BE Aerospace (BEAV) -note:they have an investor's conference March 23.
Goodrich (GR)
Precision Castparts (PCP)
Boeing (BA)
Esterline Tech. (ESL)
Armor Holdings (AH)
DynCorp (DYN)
General Dynamics (GD)
Loockheed Martin (LMT)
Northrup Grumman (NOC)

L-3 (LLL) seems fully valued now
Force Protection (FRPT) seems fully valued now
Raytheon (RTN) seems fully valued now