The best defense stocks boast long-term programs as well as footholds in emerging priorities for the U.S. and its allies, amid the Russian invasion of Ukraine.
Russia-Ukraine War Impacts Defense Stocks
Defense stocks surged following Russia’s invasion of Ukraine in February. They’re struggling now along with the broader stock market.
The U.S. and its European allies are spending billions in military aid for Ukraine. They are sending weapons such as the Lockheed Martin (LMT) Javelin anti-tank missiles and Raytheon (RTX) Stinger air-defense systems.
Longer term, the Ukraine war could mean big increases in military spending as well.
Northrop Grumman Stock
Northrop Grumman (NOC) revenue totaled $35.67 billion in 2021.
Shares of the IBD Leaderboard stock broke out to highs in early June, then plunged. NOC stock has formed a new double-bottom base with a 487.99 buy point. It sat 2% below the entry Aug. 5 but above support at the 10-week moving average. The rising relative strength line for Northrop stock remains not far from highs, according to MarketSmith analysis.
Northrop makes the B-2 stealth bomber and will make the next-gen B-21 stealth bomber as well. The B-21s could eventually replace B-2s as well as Cold War-era B-52s.
The defense company is a major subcontractor on Lockheed’s F-35 program and also produces drones such as the Global Hawk. Meanwhile, its purchase of Orbital ATK boosted its space offerings.
In addition, Northrop Grumman is developing the U.S. Air Force’s next-gen intercontinental ballistic missile system, called Sentinel.
Lockheed Martin Stock
Lockheed Martin generated revenue of $67 billion in 2021.
Lockheed stock jumped in early August to regain the 10-week average, after reclaiming the 40-week line in late July. The RS line for LMT stock has rallied this year and continues just below highs. Shares carry a Composite Rating of 89 and an EPS score of 81.
Lockheed makes the F-22 and F-35 fighter jets. Its F-35 Lightning II program promises to be a key moneymaker for years to come. The stealth fighter will be key to countering Russia and China.
The U.S. and its allies have 3,100 F-35s on order through 2035, making Lockheed one of the best defense stocks for steady, long-term revenue.
And more countries are queuing up. In the wake of Russia’s Ukraine invasion, Germany and Canada announced plans to buy dozens of F-35s.
Meanwhile, Lockheed has key hypersonic weapons in the works. For NASA, Lockheed is developing the Orion spacecraft. With Boeing, it makes and operates rockets for launching spacecraft into orbit.
Raytheon Technologies Stock
Raytheon’s Missiles & Defense business reported 2021 sales of $15.54 billion, almost a quarter of the company’s total revenue. Like Boeing (BA), Raytheon taps both military and commercial aerospace.
Shares continue to work on a 106.12 buy point. Raytheon stock sits 12% below the entry, straddling the 10-week and 40-week averages. It earns a Comp Rating of 73 and an EPS score of 62.
Missiles are key to Raytheon’s defense business, making it one of the best defense stocks amid threats from Russia, China, North Korea and Iran.
Raytheon makes the Javelin anti-tank missile and Stinger anti-aircraft missile, both being used in the Russia-Ukraine war. It also builds the Patriot and Tomahawk missiles.
Meanwhile, Raytheon is ramping up in cyberdefense and hypersonic weapons technology.
Elbit Systems Stock
Elbit Systems (ESLT) generated 2021 revenue of $17.05 billion.
Shares topped a 232.86 cup-with-handle buy point Aug. 3. ESLT stock is in buy range to 246.60, backed by a strong RS line. Elbit stock bears a Comp Rating of 91 and an EPS Rating of 57.
Founded in 1996, the Israeli company develops and supplies a broad portfolio of airborne, land and naval systems for military and commercial aviation. Those include Unmanned Aircraft Systems (UAS), which it describes as the backbone of the Israel Defense Forces.
Combined, Israel, the U.S. and Canada account for more than half of Elbit Systems’ revenue.
Howmet Aerospace (HWM) generated nearly $5 billion in 2021 sales.
HWM stock briefly topped a 37.76 buy point in early August. But shares are now below the entry. Howmet stock sits well above the 10-week average as well as the 40-week line. Howmet stock earns a superior Composite Rating of 96 and an EPS Rating of 77.
The Pittsburgh-based company supplies the Lockheed-made, fifth-generation F-35 stealth fighter jets.
It provides the forged aluminum and titanium bulkheads. Howmet also supplies the titanium for other airframe structures.
To propel the powerful F-35 engine, Howmet supplies superalloy blades and vanes. More broadly in defense, it provides parts for fluid management systems, radars and other defense systems.
In addition, Howmet taps the commercial aerospace market for customers like Boeing (BA). Boeing stock remains below a falling 10-week average and far below the 40-week line, due in part to commercial aviation woes.
Boeing stock is rallying strongly after achieving a key milestone. It’s back above the 10-week line, but there’s no proper entry for now.
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