If the world goes to hell in a handbasket, here are the profitable defense stocks you’ll wish you owned.
The Strategic Landscape
Amidst ongoing conflicts, the choice of defense stocks for investors might seem crucial yet unpredictable due to varying government spending priorities. Though economic upheaval isn’t my primary prediction, several scenarios could disrupt the U.S. economy.
For example, one concern is the unsustainable national debt, which experts like BlueBay’s Mark Dowling warn could lead to significant financial instability. Additionally, a major conflict in the Middle East could spike oil prices, potentially triggering a recession. There’s also the persistent threat of terrorism, particularly with ongoing global tensions.
Despite economic uncertainties, defense stocks could remain resilient due to consistent demand for U.S. weaponry amid geopolitical challenges. If chosen wisely, these profitable defense stocks can offer defensive stability based on critical product demand rather than heavy government funding reliance.
Northrop Grumman (NOC)
Northrop Grumman (NYSE:NOC), a key player in aerospace and defense, excelled in Q1 2024 with $10.1B in sales, a 9% year-over-year (YOY) increase. The company leads in satellite manufacturing and space technology, contributing to missions like NASA’s Artemis program.
Despite recent declines, NOC is positioned for growth with new contracts and partnerships, including NATO’s interest in expanding maritime surveillance with Triton aircraft. Analysts foresee potential gains, with NOC trading at 17.7x forward earnings and 1.6x sales, suggesting a 14% upside next year.
In other NOC news, Northrop Grumman’s XRQ-73, designated for DARPA’s Shepard program, is led by its Aeronautics Systems division in Redondo Beach, CA. Collaborating with Scaled Composites, known for its expertise in aircraft design, the program builds on technology from the earlier Great Horned Owl project.
Lockheed Martin (LMT)
Similar to Northrop, Lockheed Martin (NYSE:LMT) offers stable investment potential in space stocks, focusing on satellite technology amid rising geopolitical tensions. Despite a nearly flat performance in 2024, analysts rate it a Hold with a modest upside.
Financially, Lockheed reported $6.78 billion in net income over the past year, with revenue reaching $69.64 billion. Expectations for fiscal 2024 foresee earnings at $26.27 per share and revenue climbing to $72.36 billion in 2025, complemented by a 2.7% forward dividend yield, emphasizing stability.
Lockheed Martin’s advanced weather satellite, built for NOAA, successfully launched from NASA’s Kennedy Space Center via a SpaceX Falcon Heavy rocket. Named GOES-U, it deployed its solar array and established communication with operators, set to offer weather imagery and data over North America.
General Dynamics (GD)
General Dynamics (NYSE:GD), known for its operations in aerospace, marine systems, combat systems, and technologies, saw robust financial performance with revenue climbing to $10.7 billion, up 8.6% YOY.
In late March, Gulfstream Aerospace, a General Dynamics division, achieved FAA-type certification for its new Gulfstream G700. Increased demand in Combat Systems and growth in Marine Systems, driven by U.S. Navy contracts, are key drivers.
The company boasts a 1.97% dividend yield, consistently increased for 33 years, showing resilience despite recent peaks. With strong sectors and order backlog, GD stock is positioned well for continued growth.
