The U.S. defense industry exercises solid domination over the rest of the world, thanks to lucrative fiscal investments and continuous upgradation of its defense technologies. Moreover, global defense spending hit a record high of $2.10 trillion in 2021, up 7% year-over-year.
Furthermore, aerospace and defense industry investments have multiplied manifold globally due to the Russia-Ukraine conflict. Also, escalating tension between China and Taiwan could spur U.S. military spending.
According to Research and Markets, the global defense market is expected to grow at a CAGR of 5.8% from 2021 to 2026.
Amid dynamic international relations between countries, investors’ interest in defense and aeronautics stocks is evident from the iShares U.S. Aerospace & Defense ETF’s (ITA) 4.5% gains over the past month.
Given this backdrop, it could be wise to buy fundamentally sound aerospace and defense stocks Lockheed Martin Corporation (LMT), L3Harris Technologies, Inc. (LHX), and Raytheon Technologies Corp. (RTX) now.
Lockheed Martin Corporation (LMT)
Security and aerospace company LMT researches, designs, develops, manufactures, integrates, and sustains technology systems, products, and services worldwide. It operates through four segments: Aeronautics; Missiles and Fire Control; Rotary and Mission Systems; and Space.
On August 4, 2022, LMT’s Sixth and final SBIRS missile warning satellite was successfully launched. This is a huge leap ahead toward highly advanced military technology. Moreover, on July 20, 2022, LMT and The Goodyear Tire & Rubber Company (GT) announced their agreement to commercialize lunar mobility.
Kirk Shireman, vice president of Lunar Exploration Campaigns at LMT, said, “We’re developing this new generation of lunar mobility vehicle to be available to NASA and for commercial companies and even other space agencies to support science and human exploration.”
LMT’s cash from operations came in at $1.33 billion for the second quarter ended June 26, 2022, up 5% year-over-year. Its free cash flow increased 8.1% year-over-year to $1.03 billion. Moreover, the company’s aeronautics segment’s operating profit increased 7% year-over-year to $612 million.
Analysts expect LMT’s revenue to increase 2.7% year-over-year to $67.03 billion in 2023. Its EPS is estimated to increase 27.2% year-over-year to $27.60 in 2023. The company surpassed EPS estimates in three of the four trailing quarters. Over the past year, the stock has gained 17.1% to close the last trading session at $423.86.
LMT’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LMT is also rated a B in Stability and Quality. Within the Air/Defense Services industry, it is ranked #9 of 76 stocks. Click here to see the additional POWR Ratings for Momentum, Growth, and Sentiment for LMT.
L3Harris Technologies, Inc. (LHX)
LHX provides mission-critical solutions for government and commercial customers worldwide. Its segments are Integrated Mission Systems; Space and Airborne Systems; Communication Systems; and Aviation Systems.
On August 1, 2022, U.S. Special Operations Command selected LHX’s and Air Tractor Inc.’s AT-802U Sky Warden™ system for its Armed Overwatch program. This is a milestone achievement for the companies.
LHX’s net income came in at $471 million for the second quarter ended July 1, 2022, up 14% year-over-year. Its net cash from operating activities increased 4% year-over-year to $749 million. Moreover, the company’s adjusted EBITDA increased 2.2% sequentially to $879 million.
Analysts expect LHX’s revenue to increase 5.1% year-over-year to $17.95 billion in 2023, while its EPS is estimated to increase 9.3% year-over-year to $14.44. The company surpassed EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 8.68% to close the last trading session at $231.75.
LHX has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade in Quality. It is ranked #10 in the Air/Defense Services industry. Beyond what is stated above, we’ve also rated LHX for Growth, Momentum, Stability, Sentiment, and Value. Get all the LHX ratings here.
Raytheon Technologies Corp. (RTX)
RTX provides systems and services for commercial, military, and government customers. It operates through four segments- Collins Aerospace Systems; Pratt & Whitney; Intelligence & Space; and Raytheon Missiles & Defense.
On July 26, 2022, RTX’s Chairman and CEO Greg Hayes said, “We continue to be focused on strategic investments in technology and innovation that will drive our industry leadership today and into the future.”
RTX’s sales came in at $16.31 billion for the second quarter ended June 26, 2022, up 2.7% year-over-year. Its net income increased 10% year-over-year to $1.72 billion, while its EPS came in at $1.16, up 12.6% year-over-year.
Analysts expect RTX’s revenue to increase 8.5% year-over-year to $73.48 billion in 2023. Its EPS is expected to increase 18.6% year-over-year to $5.58 in 2023. The company surpassed EPS estimates in all the trailing four quarters. Over the past year, the stock has gained 5.97% to close the last trading session at $91.20.
RTX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our rating system. It is ranked #22 in the same industry. Click here to see the additional POWR Ratings for RTX (Growth, Value, Momentum, Sentiment, and Quality).
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LMT shares were trading at $427.17 per share on Tuesday afternoon, up $3.31 (+0.78%). Year-to-date, LMT has gained 21.78%, versus a -12.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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