Ahead of the Bell: Defense spending

HARTFORD, Conn. - A key congressional committee's spending proposals for fighter jets and other military hardware would help Boeing Co., Lockheed Martin Corp. and General Dynamics Corp., an analyst said Friday.

However, the funding plan by the House Appropriations defense subcommittee must survive a threatened veto by President Barack Obama.

The spending proposal "contained a number of surprises that tend to support the aerospace industry," analyst Howard A. Rubel of Jefferies & Co. wrote in a client note.

Rep. John Murtha, chairman of the subcommittee, said Thursday he is confident that plans to add $369 million to the Pentagon's budget for a dozen more F-22 jets will survive a White House veto threat.

Obama has threatened to veto any defense spending that includes money for the F-22, built by Lockheed Martin Corp., if lawmakers succeed in their effort to buy more planes beyond the 187 requested. Engines for the jets are built by Pratt & Whitney, a subsidiary of United Technologies Corp.

Rubel said the value of aerospace and defense company shares has "recovered well" from their low point in early March, but they "discount expected production cuts at Boeing and Airbus starting this fall and an eventual decline in military spending after 2010."

Despite Democratic control of Congress and the White House, "it appears that the legislative branch feels pushed a bit too hard and is fighting back," he said.

"Legitimate military and constituent interests are at play here, including the need to maintain a well-resourced industrial base and an up-to-date military," he said.

The additional spending proposed by the subcommittee is not reflected in the price of most aerospace-related shares, Rubel said.

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