New Chinese factory data indicate that the industry’s activity may have bottomed. (Reuters)

Chesapeake Energy (NYSE: CHK) will appoint a new chairman after a scandal that involves payment to CEO Aubrey McClendon. (Reuters)

General Motors (NYSE: GM) would like to buy a third of Isuzu. (Reuters)

Research In Motion (NASDAQ: RIMM) releases a number of smartphone prototypes to show the company’s future product launches. (Reuters)

The Facebook IPO roadshow will start this week. (WSJ)

Lockheed Martin (NYSE: LMT) management says government budget cuts will cause more M&A in the industry. (WSJ)

Some advertisers are skeptical about the return on their Facebook ads just as the firm readies its initial public offering. (WSJ)

Pfizer (NYSE: PFE) profits are hurt by generic competition to Lipitor. (WSJ)

The pace of auto sales slows in April. (WSJ)

The U.S. Interior Department will shift nearly 100,000 workers to Google’s (NASDAQ: GOOG) email product. (WSJ)

The sales of handsets by Motorola Mobility (NYSE: MMI) drop in the past quarter. (WSJ)

A director of the Financial Industry Regulatory Authority is blocked from starting his own company. (WSJ)

The Dow Jones Industrial Average hits a four-year high. (WSJ)

Toyota (NYSE: TM) sales reach a four-year high after drops related to the Japanese earthquake. (NYT)

New data on manufacturing in the United States and China show the disparity between the growing economies and Europe. (FT)

High prices of some commodities continue to undermine the profits of many companies. (FT)

Douglas A. McIntyre

The company’s revenues from commercial aircraft sales jumped 54% to $10.94 billion and sales of military aircraft rose 27% to $4.3 billion. It’s interesting to contrast Boeing’s military business with other military contractors like General Dynamics Corp. (NYSE: GD) and Northrop Grumman Corp. (NYSE: NOC), both of which also reported earnings today. Lockheed Martin Corp. (NYSE: LMT) and Raytheon Corp. (NYSE: RTN) are scheduled to report earnings tomorrow.

Boeing’s defense and space business posted an operating margin of 9% in the first quarter, about 10% lower than its operating margin in the company’s commercial aircraft business. But the margin growth was only 0.2% year-over-year in defense, compared with margin growth of 2.7% in the commercial business.

Boeing also lifted its full-year EPS forecast from $4.05-$4.25 to a new range of $4.15-$4.35.

General Dynamics, which makes tanks and combat vehicles, reported that sales in its combat systems group fell -2.3%. Northrop reported that sales in its aerospace group, which manufactures drones, fell -8% and profits fell -2.7%. Northrop’s electronics group posted a gain in profits even as sales fell.

The proposed cut of $490 billion in US defense spending over the next 10 years will certainly have a larger impact on General Dynamics and Northrop than it will on Boeing. Still today’s report from the US Census Bureau on durable goods orders is not too encouraging for Boeing either. Of a decline of $7.7 billion in new orders for aircraft and parts, some $7.1 billion of the drop came in non-defense orders (our coverage here).

The backlog of orders for non-defense aircraft is up 15.6% compared with March 2011 and the defense backlog is up 5.6%. But those backlogs are likely to shrink as new orders, especially for non-commercial aircraft, are filled.

Lockheed is expected to post EPS of $1.70 on revenue of $10.56 billion tomorrow. Raytheon, also scheduled to report earnings tomorrow, is slated to post EPS of $1.16 on revenue of $5.77 billion. For both the EPS estimate is lower than year-ago actuals, while the revenue estimates are higher.

Boeing’s shares are up 4.3% in the first half-hour of trading this morning at $76.36 in a 52-week range of $56.01-$80.65.

General Dynamics’ shares are down -1.3% at $69.12 in a 52-week range of $53.95-$75.93.

Northrop’s shares are up 2.3% at $64.18 in a 52-week range of $49.20-$70.61.
Shares of Lockheed are up 0.5% at $91.60 after posting a new 52-week high of $91.79, and shares of Raytheon are up 0.9% at $53.47 after another new 52-week high of $53.56.

Paul Ausick

Read The Ten Companies Profiting Most from War

The institute recently published its annual report on the leading arms producing companies in the world — SIPRI Top 100. The report identifies the largest companies in the sector and provides each company’s arms sales as a percentage of its total sales. Based on the report, 24/7 Wall St. identified the 10 companies with the highest revenue from arms sales. These companies alone account for $230 billion — over half of all arms sales that year.

While many industries continued to suffer in 2010 as a result of the financial crisis, leaders in the arms and military services were largely unaffected. According to SIPRI arms industry expert Dr. Susan Jackson, when sales dropped, it was not because of the financial crisis. Instead, Dr. Jackson notes that loss in sales was due to “the withdrawal of foreign troops from Iraq and the subsequent expected decrease in related equipment sales.”

The composition of the 10 largest manufacturers reflects the state of modern warfare. More and more, battles are fought remotely through air surveillance and strikes rather than on-the-ground combat. As a consequence, seven of the 10 largest companies are among the leading aerospace companies. Surveillance and battlefield communications also are increasingly important in modern warfare. All of the companies in the top 10 have significant electronics divisions.

Of the 100 companies on the list, 44 are based in the U.S., including Boeing, Northrop Grumman and Lockheed Martin. The American companies account for more than 60% of arms sales revenue of the 100 manufacturers. Seven of SIPRI’s top 10 are American, one is British, one is Italian and one is a multinational EU conglomerate. The U.S. federal government has contract deals with all seven American companies. These seven are among the top 10 U.S. federal contractors by amount procured, according to the government’s Federal Procurement Data System.

24/7 Wall St.’s analysis of the SIPRI 100 includes revenue for arms sales for 2007, 2009 and 2010, as well as percentage of company revenue from arms sales, employees, industry and applicable military division. 24/7 Wall St. also included history of each company and notable weapons systems manufactured.

These are the 10 companies profiting most from war.

The unofficial closing bells put the DJIA down more than 22 points to 12,734.63 (-0.18%), the NASDAQ fell about 13 points (-0.46%) to 2,805.28, and the S&P 500 fell -0.57% or nearly 7 points to 1,318.45.

There were several analyst upgrades and downgrades today, including General Dynamics Corp. (NYSE: GD) cut to ‘perform’ at Oppenheimer; Vale S.A. (NYSE: VALE) cut to ‘hold’ at Deutsche Bank; Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) started as ‘perform’ at Williams Capital; Corning Inc. (NYSE: GLW) cut to ‘underweight’ at Morgan Stanley; and Chesapeake Energy Corp. (NYSE: CHK) cut to ‘underweight’ at JPMorgan.

Earnings reports since markets closed on last night have led to some price changes as of the last half hour of trading today: Airgas Inc. (NYSE: ARG) is down -3.66% at $77.29; Arctic Cat Inc. (NASDAQ: ACAT) is up more than 19% at $28.40 after posting a new 52-week high of $29.20 earlier today; AT&T Inc. (NYSE: T) is down -2.65% at $29.41; Bristol-Myers Squibb Co. (NYSE: BMY) is down -0.92% at $32.40; Caterpillar Inc. (NYSE: CAT) is up 1.95% at $111.18; Cypress Semiconductor Corp. (NASDAQ: CY) is down more than -11% at $17.03; Lockheed Martin Corp. (NYSE: LMT) is up 0.95% at $82.51; McCormick & Co. Inc. (NYSE: MKC) is up 0.90% at $78.55; Monster Worldwide Inc. (NYSE: MWW) is down more than -20% at $7.18; Potash Corp. of Saskatchewan Inc. (NYSE: POT) is up 1.61% at $45.96; and Raytheon Co. (NYSE: RTN) is up 0.34% at $49.88.

Other standouts from today include the following stocks:

VIST Financial Corp. (NASDAQ: VIST) is up more than 62% at $11.20 after posting a new 52-week high of $11.50 earlier today. The bank holding company has agreed to be acquired by Tompkins Financial Corp. (AMEX: TMP) in an all-stock deal at an 86% premium to last night’s closing price, or about $85 million.

RealNetworks Inc. (NASDAQ: RNWK) is up more than 35% at $9.98. The digital media company has sold a video codec and a number of patents to Intel Corp. (NASDAQ: INTC) for $120 million.

Momenta Pharmaceuticals Inc. (NASDAQ: MNTA) is down nearly -21% at $15.13. The biotechnology company lost its bid for an injunction against certain competitors.

Netflix Inc. (NASDAQ: NFLX) is up about 22% at $116.01. The digital video streaming and rental company reported a better-than-expected number of new subscribers after markets closed last night.

Enterprise Financial Services Corp. (NASDAQ: EFSC) is down more than -19% at $12.51. The bank holding company will restate earnings for 2010 and the first three quarters of 2011 and expects to dilute 2010 earnings by half as a result.

Stay tuned for Friday. New York Fed President William Dudley is giving a speech in the morning. We have noted the following events on the schedule (all times Eastern):

• 8:30 a.m. – US GDP report
• 9:55 a.m. – Reuters/University of Michigan consumer sentiment index

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Paul Ausick

Read: The 10 Most Expensive Weapons in the World

To understand the magnitude of these weapons’ budgets, one only needs to look at the recent government initiatives aimed to save the economy. The $868 billion cost of the most expensive weapons in the world is much more than the $700 billion set aside by Congress as part of the TARP to salvage the nation’s massive financial system. It is also more than President Obama’s $787 billion stimulus package approved by Congress in February 2009.

The Pentagon breaks the costs of weapons into two categories. The first is research and development. The second is the actual costs to buy the weapons. Together, the two figures can be staggering. The total cost of the Virginia Class Submarine, for example, surpasses $83 billion. That entire amount has been and will be invested to launch only 30 of the weapons. All told, it is an extraordinary expense base to maintain America’s defense.

24/7 Wall St. reviewed the figures from the Department of Defense budget and provided by the General Accounting Office to find the 10 Most Expensive Weapons in the World.”

Samsung Sales Surge

Samsung proved that it is the only real challenger to Apple (NASDAQ: AAPL) in the smartphone industry — for now. Its estimated earnings were $4.5 billion for the fourth quarter, up nearly 40% from the same period a year ago. It now has passed Apple in total global iPhone sales, and it has a legitimate chance to pass Nokia (NYSE: NOK), the top handset maker in the world. Samsung has shown it is the master of the design of Google (NASDAQ: GOOG) Android-based phones and tablets, with its Galaxy series capturing much of the top of the market.

Our Shrinking Military

Yesterday was a grim one for U.S. defense contractors such as Lockheed Martin (NYSE: LMT) and Boeing (NYSE: BA). President Obama announced that military spending would be cut by $487 billion during the next 10 years. The administration’s plan is to shrink the U.S. fighting force to a level at which it can no longer fight two large land wars. The focus of defense activity will move toward Asia and the ongoing threat of terrorism. That means fewer large arms systems will be part of the Pentagon’s future plans.

IMF GDP Forecast

International Monetary Fund chief Lagarde said the agency would cut its forecast for global GDP growth in 2012. She indicated the prime reason for the cut was the sharp slowdown in the economies in Europe. Like most experts, Lagarde believes that a recession on one continent will curtail growth on others. America, Japan and China cannot defy the gravity of low demand. The IMF, she said, will drop its forecast for worldwide expansion to below 4%.

Douglas A. McIntyre

Acme Packet, Inc. (NASDAQ: APKT) Cut to Neutral at Wedbush; estimates and targets lowered after revenue warnings from Morgan Keegan and Wells Fargo.
Affymetrix Inc. (NASDAQ: AFFX) Raised to Neutral from Underweight at JPMorgan.
AK Steel Holding Corporation (NYSE: AKS) Raised to Neutral at Bank of America Merrill Lynch.
Apple Inc. (NASDAQ: AAPL) Reiterated Outperform with $500 target and raised estimates at Credit Suisse.
Crown Castle International Corp. (NYSE: CCI) Started as Buy at Stifel Nicolaus.
EMC Corporation (NYSE: EMC) added to the U.S. Focus List at Credit Suisse.
General Dynamics Corporation (NYSE: GD) Raised to Overweight at JPMorgan.
Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) Reiterated Buy with $94 target at Canaccord Genuity.
Lockheed Martin Corporation (NYSE: LMT) Cut to Underperform by RBC Capital Markets.
Mosaic Co. (NYSE: MOS) Cut to Neutral at Citigroup.
NetApp Inc. (NASDAQ: NTAP) Cut to Neutral from Outperform at Credit Suisse.
Potash Corp. of Saskatchewan, Inc. (NYSE: POT) Started as Underperform at National Bank.
Steel Dynamics Inc. (NASDAQ: STLD) Raised to Buy at Bank of America Merrill Lynch.
TiVo Inc. (NASDAQ: TIVO) Raised to Overweight at Evercore Partners.

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JON C. OGG

Natural gas and other fuels were the largest U.S. export in terms of dollars in 2011, an unexpected development. The idea that America could export energy when it is so dependent on foreign oil seems unlikely. But natural gas is plentiful in the U.S., and demand from overseas for jet fuel and diesel was large.

Notwithstanding the sharp rise in fuel exports, planes and agricultural products have been at or near the top of the export list. That did not change much in 2011. The U.S. is still the “bread basket” of the world, and corn and wheat are still exported in hundreds of millions of tons. But the demand for commercial and military planes remains high and is getting higher.

Many economist would argue, correctly, that without the fuel, aircraft, and agricultural exports, hundreds of thousand of jobs would be lost. The debate over whether sustaining these jobs has any ethical implication is easy to answer in terms of energy or grain. There is no potential loss of human life tied to these products. In fact, agricultural products probably save lives.

Weapons fall into the class of products that can, and often do, kill people. The export of weapons is not confined to aircraft. Guns and shells use to kill on the ground are also included.

There are two arguments in favor of weapons exports. The first is that Lockheed Martin (NYSE: LMT) and Boeing (NYSE: BA) are large employers. The other is that weapons sales tether allies like Saudi Arabia to the U.S. This second argument in favor of arms sales is extremely compelling.

The protests over arms sales to foreign governments will exist as long as the practice goes on. The American government has made a reasonable exchange. These sales create jobs, and the U.S. is not responsible for how the guns and airplanes are used, although its is almost certain that they will be.

Douglas A. McIntyre

Slow wage growth may keep U.S. consumer spending weak this year. (Reuters)

Hyundai and Kia expect slower growth in 2012. (Reuters)

Verizon Wireless kills a $2 transaction fee due to customer objections. (Reuters)

Eastman Kodak (NYSE: EK) loses a third board member in two weeks. (Reuters)

The UK sells mortgage company Northern Rock to Virgin. (Reuters)

China’s PMI rises to 50.3, a sign of slow growth. (WSJ)

An international arbitration panel gives Exxon Mobil (NYSE: XOM) only $908 million for Venezuela assets; the oil firm had asked for payment of $7 billion. (WSJ)

Sprint-Nextel (NYSE: S) offers superfast broadband firm LightSquared a 30-day extension to get its system approved by the U.S. government. (WSJ)

A tax credit for ethanol to expire after being in place for 30 years. (NYT)

Austerity programs will make GDP growth in many eurozone nations very difficult. (NYT)

Sarkozy and Merkel warn their nations that 2012 will be more difficult economically than 2011. (FT)

Major global markets lose $6.3 trillion in value in the past year. (FT)

Eurozone leaders try to gain extra time to rebuild the region through promises of aid and new austerity. (Bloomberg)

Manufacturing in India and China signal that they are being hurt by EU economic trouble. (Bloomberg)

Japan’s population drops the most since World War II. (Bloomberg)

Douglas A. McIntyre

In the age of austerity and military budgets being slashed to deal with deficits, Iran has a chance of turning 2012 accidentally into the year of defense stocks. Alliant Techsystems Inc. (NYSE: ATK), General Dynamics Corp. (NYSE: GD), L-3 Communications Holdings Inc. (NYSE: LLL), Lockheed Martin Corporation (NYSE: LMT) and Raytheon Co. (NYSE: RTN) could all hang in the balance. With operations all but gone in Iraq and with the trend in Afghanistan being one of leaving, Iran is the obvious wild card.

If anything real ever comes out of Iran’s religious political leadership other than how neat it is to stone people over adultery, how it denies that alternative lifestyles exist in Iran, or about how it wants nuclear power for peace, this may end up making the sell-off seen in defense stocks a bargain of the century. If (or when) Iran ever announces that it has built a nuclear bomb, it likely is going to be difficult for Western nations to slash and burn too far on the defense spending. Before running out and loading up on warfare stocks, please remember … this is all “If, Then.”

Alliant Techsystems Inc. (NYSE: ATK) trades at $56.15 and the 52-week trading range is $51.26 to $78.17. Thomson Reuters has a consensus price target of $71.70, implying upside of roughly 28%. Alliant Tech currently has a lower dividend yield against peers with only a payout rate of about 1.4% and shares are up about 4% since the Thanksgiving break. Alliant is highly dependent on the business of selling bullets and it no longer has the booster-rocket business from Space Shuttle launches.

General Dynamics Corp. (NYSE: GD) trades at $66.15 and the 52-week trading range is $53.95 to $78.27. Thomson Reuters has a consensus price target of $76.16, implying upside of about 15%. General Dynamics currently yields about 2.9%.

L-3 Communications Holdings Inc. (NYSE: LLL) trades at $66.85 and the 52-week trading range is $58.30 to $88.55. Thomson Reuters has a consensus price target of $71.64, implying upside of only about 7%. L-3 yields about 2.7% in its dividend and shares are up about 5% from the Thanksgiving break.

Lockheed Martin Corp. (NYSE: LMT) trades at $81.25 and the 52-week trading range is $66.36 to $82.43. Thomson Reuters has a consensus price target of $80.12, implying that the stock is above a full-value price. Its dividend yield is quite high at about 5% and shares are up almost 5% since its $1.00 dividend was reflected in the stock in late November.

Raytheon Co. (NYSE: RTN) trades at $48.50 and the 52-week trading range is $38.35 to $53.12. Thomson Reuters has a consensus price target of $49.53, implying upside of only about 2%. Its dividend yield is currently about 3.7% and shares are up about 14% since the Thanksgiving break.

Unless something new comes out of North Korea, or unless there is more unrest in the Middle East, Iran is the big worry for the country today. With such high payouts from some defense contractors, it is worth wondering just how high some of the payouts can rise during the proliferation of austerity.

JON C. OGG