Military Stocks To Buy Now
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The paradigm for investing in defense stocks changed in a dramatic way when Russia invaded Ukraine in February 2022. U.S. President Joe Biden's recently proposed fiscal 2024 Department of Defense budget calls for $842 billion in discretionary DoD spending, up 3.2% from 2023 levels. Bank of America analyst Ronald Epstein expects DoD discretionary spending will surpass the $1 trillion mark by fiscal 2026, creating big opportunities for defense companies.
Northrop Grumman is one of the world's largest weapons and military technology producers. Epstein says Northrop is a key DoD contractor in next-generation aircraft and space defense. Epstein says investors shouldn't be concerned about Northrop's weaker fourth-quarter margins and soft initial 2023 free cash flow guidance. He says the margin pressures are largely attributable to the wind-down of high-margin legacy programs like Global Hawk, E-2 and JSTARS. Epstein says Northrop's terminal growth rate could exceed the historical growth rate of U.S. defense spending. Bank of America has a "buy" rating and $655 price target for NOC stock, which closed at $449.98 on March 21.
General Dynamics produces a range of vehicles and systems for the U.S. military. In February, Epstein raised his forecast for 2024 Gulfstream deliveries to 170 aircraft, including 138 large aircraft and 32 midsize planes. He projects 4.9% revenue growth in 2023, including first-quarter Marine segment sales of $2.5 billion and Technology segment sales of $3.1 billion. Epstein is bullish on General Dynamics' exposure to defense spending related to land and sea priorities, as well as the commercial aerospace market recovery. Bank of America has a "buy" rating and $305 price target for GD stock, which closed at $222.37 on March 21.
BA stock earns an IBD Composite Rating of 67, EPS Rating of 25 and RS Rating of 91, all out of a best-possible 99. A 91 RS Rating means that Boeing has outperformed 91% of all stocks in IBD's database over the past year.
Based in Stamford, Conn.-based, Hexcel supplies adhesives and composites for more than 100 military aircraft and space programs. Those include the Lockheed Martin F-35, the Boeing Hornet and the Eurofighter Typhoon.
In space applications, advanced composites are used for rocket booster cases and payload doors for launch vehicles, the company says. They are also used in solar arrays for military and commercial satellites.
Russia's invasion of Ukraine has, among other things, unsettled much of the stock market. However, one corner of the market has experienced a lift as a result, and stands to keep benefiting should this conflict continue or other geopolitical risks rise: defense stocks.
In addition to these catalysts, defense stocks might be even more compelling in the face of a possible economic slowdown as the Federal Reserve kicks off its first rate-hiking cycle in years. Unlike other areas of the market, the defense industry has a steady and reliable revenue source in the U.S. government.
The company manages U.S. military bases and facilities around the world, providing supply chain and logistics, information technology support, engineering, security and other services. In mid-2021, it built a 250,000-square-foot facility (Freedom Village) in 45 days to house thousands of Afghan refugees.
The vast majority of Wall Street analysts agree that the blue chip is one of the best defense stocks out there. Of the 23 pros following the name that are tracked by S&P Global Market Intelligence, 12 say it's a Strong Buy and five call it a Buy. This compares to four that have it at Hold and two that believe it's a Strong Sell.
Raytheon Technologies (RTX (opens in new tab), $101.08) is one of the largest defense stocks in the world. The company's suite of products include aircraft engines, guided missiles, satellites, drones, land warfare systems, torpedoes, air traffic control systems, radars and many others.
AAR Corp. (AIR (opens in new tab), $48.21) is the first of two Strong