Could defense stocks be an investment theme for the next decade?
1. Six New High Defense Stocks in Nov
The mid-term elections have attracted much market attention. Analysts believe that a Republican victory will benefit the defense and military sector:Republican victory in the mid-term election would set the stage for a "substantial" increase in spending, while if Democrats win at least one seat, spending would increase only "moderately,"
As the world becomes more dangerous, the obvious beneficiaries are defense manufacturers who provide arms and munitions to western governments.
Below are 6 defensive stocks keep hit new highs recently: $Parsons Corp(PSN)$, $Northrop Grumman(NOC)$, $Lockheed Martin(LMT)$, $Huntington Ingalls(HII)$ ,$Curtiss-Wright(CW)$, $General Dynamics Corp(GD)$ .
The YTD of 6 stocks in 2022 is 43.46%, 40.31%, 39.44%, 31.44%, 27.01% and 21.73% respectively.
Thess companies are benefiting from two secular tailwinds: increased defense spending across the western world and a nuclear energy renaissance to combat climate change and protect energy security.
2. Positive Updates for the Six Defense Stocks
Aviation, space, and missiles focused company $Lockheed Martin(LMT)$ launches 5G private networks at Adazi military base. LMT is one of the world’s largest aerospace and defence companies.LMT has a strong and long-term sustainable competitive advantage, and In most NATO countries, which are LMT’s customers,are announced significant increases in defence budgets, same to USA.
$Northrop Grumman(NOC)$ is one of the world’s largest defense contractors with annual revenue more than $30 billion. The company grow EPS at a rate of over 13% per year in the past decade.The company operates in a cozy oligopoly.
$(NOC)$ in partnership with NASA received the Aviation Week Grand Laureate Award for its development of the James Webb Space Telescope. StockNews.com upgraded Noc from a "hold" rating to a "buy" rating early November.
$General Dynamics Corp(GD)$ is the 5th-largest defense contractor in the US with a market cap of $68.8 billion. GD generates roughly 70% of its sales from the US government. 10% of sales come from non-US governments, which puts commercial exposure close to 20%.
GD reported a third-quarter profit above analysts' estimates, fueled by strong demand for flying private and for products and services at its Marine Systems division.
The company's revenue for the quarter rose 4.3% to $9.975 billion from $9.568 billion last year.Q3 Earnings at $902 Mln. vs. $860 Mln. last year. Q3 EPS at $3.26 vs. $3.07 last year, beat analyst estimate of $3.15.
$Huntington Ingalls(HII)$ announces REMUS 620 Next-Generation, Submarine-Deployable Medium UUV on Nov. 7 at press conference and news release.
$(Hill)$ Increases Quarterly Dividend to $1.24 per Share last week, after report 12.3% increase in revenues in third quarter of 2022. and CEO confidently expressed that “We are confident in the positioning of the business for long-term value creation, given the tremendous volume of shipbuilding work we have secured in backlog and a Mission Technologies division that is poised for growth in markets of critical importance to our customers.”
Aerospace & Industrial，Defense Electronics，Naval & Power segments focused company$Curtiss-Wright(CW)$ was the leading aircraft engine manufacturer in the U.S. pre-World War 2.
It reported third-quarter 2022 adjusted earnings of $2.07 per share, which surpassed the Zacks Consensus Estimate of $2.03 by 1.9%. The company expects adjusted earnings in the band of $8.05-$8.20 per share compared with the prior range of $8.10-$8.30 per share.
$Parsons Corp(PSN)$ Reported Revenue increases 19% year-over-year to $1,134 million, includes organic growth of 11%,Organic revenue growth driven by both segments: Critical Infrastructure 13% and Federal Solutions 10%. Net income increases 53% to $30 million. Adjusted EBITDA increases 22% to $103 million. Cash flow from operations increases 59% year-over-year, and 28% for the first nine months of 2022.
$Parsons Corp(PSN)$ had its price target upped by equities research analysts at Raymond James from $46.00 to $55.00 in a report released on last Thursday.
3.Fundamental Comparison of Six Defense stocks:
According to the market value ranking, we made the following comparisons on Profile, income, profit, ratings, and dividend. Hope this will help you better understanding the operating and history return on investing.
Data from Seaking Alpha
Data from Seaking Alpha
Data from Seaking Alpha
4. Any other good choices in this industry?
The US defense market is now controlled by five large companies: The Boeing Company (BA), General Dynamics Corporation (GD), Lockheed Martin Corporation (LMT), Northrop Grumman Corporation (NOC), and Raytheon Technologies Corporation (RTX).
$Boeing(BA)$ is best known for its commercial airplanes, but its defense business is large enough to rank among the industry’s titans. Boeing makes several different aircraft and helicopters for the Pentagon and is also involved in space pursuits. The company's defense business has also branched out into autonomous submarines and other products.
$Raytheon Technologies Corporation(RTX)$ doesn't make warships or fighters, but it has a role in a wide range of important military platforms led by other contractors. It is the product of the 2020 merger between Raytheon, a defense electronics and missile specialist, and United Technologies, which makes aircraft engines and a variety of other aerospace parts.
If you are bullish on defense industry but would rather not choose among individual companies, you can buy shares in one or moreexchange-traded funds(ETFs) that cover the sector. Three primary ETFs are focused on defense:
- Invesco Aerospace & Defense$PPA(PPA)$
- SPDR S&P Aerospace & Defense$XAR(XAR)$
- iShares U.S. Aerospace & Defense$ITA(ITA)$
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