The best defense stocks boast long-term programs as well as footholds in emerging priorities for the U.S. and its allies, while the Russia-Ukraine war drags on.
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Russia-Ukraine War Impacts Defense Stocks
Defense stocks surged following Russia’s invasion of Ukraine in February. As that war persists and a nuclear threat grows, defense stocks are outperforming the broader stock market.
“Defense stocks including “NOC, LMT and RTX are very well-positioned to benefit from increased funding associated with nuclear missiles,” said Ken Herbert, analyst at RBC Capital, in a recent note.
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.
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NOC Stock
Northrop Grumman (NOC) revenue totaled $35.67 billion in 2021.
NOC stock earns an IBD Composite Rating of 87, EPS Rating of 72 and RS Rating of 94, out of a best-possible 99.
The relative strength line for Northrop stock has risen sharply to a decade high, according to MarketSmith analysis. A strong RS line shows a stock is outperforming the S&P 500 index.
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. In its recent commentary, RBC noted that NOC is “best-positioned to benefit from continued nuclear recapitalization efforts.”
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LMT Stock
Lockheed Martin (LMT) generated revenue of $67 billion in 2021.
The relative strength line for LMT stock is making a new high on the weekly MarketSmith chart. That is marked by a blue dot at the end of the RS line. Shares carry a Composite Rating of 89, EPS score of 83 and RS Rating of 91.
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.
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GD Stock
General Dynamics (GD) delivered revenue of $38.5 billion in 2021. The RS line for General Dynamics is also hitting highs on the weekly MarketSmith chart. GD stock bears a Comp Rating of 82, EPS Rating of 70 and RS Rating of 91.
General Dynamics, too, will benefit from greater international sales as NATO countries increase funding
Ships and submarines for the U.S. Navy help to define General Dynamics, making it one of the best defense stocks. GD helped to build Littoral Combat Ships, and it also makes the Virginia- and Columbia-class submarines.
GD also builds Arleigh Burke-class missile destroyers, a type of warship, ZumwLalt-class next-generation destroyers. Its NASSCO unit builds support ships for the Navy.
In addition General Dynamics provides the U.S. Army. It builds Abrams tanks, the Stryker family of vehicles, and light armored vehicles.
Meanwhile, its Gulfstream jets target the business customer.
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LHX Stock
L3Harris Technologies (LHX) generated nearly $18 billion in 2021 sales.
The RS line for L3Harris is surging but remains below the 2019 high. LXH stock earns a Composite Rating of 87, EPS Rating of 83 and RS Rating of 84.
The Melbourne, Fla.-based company provides defense technologies across air, land, sea, space, and cyberspace. Analysts also expect L3 Harris to benefit from demand after Russia’s invasion of Ukraine, as governments looking to replenish their arsenals.
The company emerged from the merger of Harris Corp. and L3 Technologies in 2019. Three years later, L3Harris Technologies is winning Pentagon deals worth billions of dollars, DefenseOne reports. Over the summer, it won a military contract that could be worth $3 billion for up to 75 attack planes.
Elbit Systems Stock
Elbit Systems (ESLT) generated 2021 revenue of nearly $17 billion.
The RS line for ESLT stock rallied sharply in the first half of 2022. It is not far below the July 1 high. Elbit Systems bears a Comp Rating of 72, EPS Rating of 57 and RS Rating of 90.
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.
Meanwhile, Dow Jones aerospace and defense giant Boeing (BA) remains not far from June lows. Boeing stock tumbled in the past year, due in part to commercial aviation woes.
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