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 on Feb. 24, 2022.
The U.S. is sending weapons such as the Lockheed Martin (LMT) Javelin anti-tank missiles and Raytheon (RTX) Stinger air-defense systems. They also include Stryker eight-wheeled armored vehicles, built by General Dynamics (GD).
The U.S. has given Ukraine more than $29.3 billion in military aid since the war’s start. European allies are also spending billions in weapons aid for Ukraine.
As that war drags on and a nuclear threat grows, continued big increases in military spending are likely.
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BA Stock
Boeing (BA) is known for its commercial jets and it’s also a major player in the defense sector. Defense revenue totaled $23.16 billion in 2022, roughly 35% of Boeing’s overall revenue.
BA stock earns an IBD Composite Rating of 69, EPS Rating of 27 and RS Rating of 90, all out of a best-possible 99. A 90 RS Rating means that Boeing has outperformed 90% of all stocks in IBD’s database over the past year. Boeing stock has formed a flat base with a 221.43 buy point, according to MarketSmith analysis.
The relative strength line for this top defense stock peaked in January. That strength indicator has pulled back a bit since. A rising RS line shows that a stock is outperforming the S&P 500 index.
In defense, Boeing makes the iconic B-52 bomber. Its legacy fighter jets, like the F/A-18 and F-15, have updates in the works.
Boeing is also building the T-7 Red Hawk trainer jets, the MQ-25 Stingray drone and the KC-46 tanker for the Air Force and Navy. Its P-8 Poseidon spy aircraft is proving popular with both the U.S. Navy and allied navies.
In the space realm, Boeing is building the Crew Space Transportation-100 Starliner, to ferry astronauts, as well as NASA’s Space Launch System, the most powerful rocket ever.
Boeing’s EPS Rating is weighed down by recent challenges, largely tied to its commercial plane division.
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LMT Stock
Lockheed Martin (LMT) generated nearly $66 billion in 2022 sales.
LMT stock earns a Composite Rating of 90, EPS Rating of 85 and RS Rating of 87. Lockheed stock topped a 499.05 buy point from a flat base on April 18.
Lockheed makes the F-22 and F-35 fighter jets. 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.
Meanwhile, Lockheed has key hypersonic weapons in the works. Hypersonic missiles can travel at more than five times the speed of sound, or over a mile a second, and are highly maneuverable.
In February, Lockheed won a $1.2 billion contract for the first U.S. sea-based hypersonic strike capability.
For NASA, Lockheed is developing the Orion spacecraft. With Boeing, it makes and operates rockets for launching spacecraft into orbit.
HEI Stock
Heico (HEI) makes electronic equipment for the aviation, defense, space and other industries. Revenue totaled $2.208 billion in 2022.
HEI stock carries a Composite Rating of 96, EPS Rating of 88 and RS Rating of 85.
The stock rallied at the start of 2023 and peaked at 177.55 in mid-February. It has now formed a flat base with a buy point of 177.65, regaining the 50-day average April 18.
Heico makes aircraft replacement parts, all the way from the engine to brakes and wheels. The defense contractor also produces aviation systems and components.
Florida-based Heico also taps other markets, such as medical and automotives.
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HWM Stock
Howmet Aerospace (HWM) generated $5.663 billion in 2022 sales.
HWM stock bears a Composite Rating of 89, EPS Rating of 74 and RS Rating of 89. Howmet stock is nearing a 44.47 buy point from a cup-shaped base.
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 Aerospace 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.
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HXL Stock
Hexcel (HXL) reported $1.578 billion in 2022 sales. HXL stock holds a Composite Rating of 96, EPS Rating of 81 and RS Rating of 89.
The aerospace and defense contractor continues to work on a 75.09 flat-base buy point, but has fallen below the 50-day moving average.
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.
Hexcel also supplies commercial aircraft like the Boeing 737 Max and 787 Dreamliner. It is a leader in producing advanced composites for helicopter blades, including carbon fiber.
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.
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