Aerospace and defense companies to consider adding to the long-term portfolio. High profits, rising dividends, lucrative industry, make these companies attractive.
The aerospace and defense industry is one of the industries with the largest spending rates in the world. For example, in 2021 alone, the estimated NATO spending is $1.2 trillion.
NATO or the North Atlantic Treaty Organization, is made out of many countries, but the United States is the biggest country contributing to its budget. More than $800 billion out of NATO’s spending budget comes from the United States, a country that outpaces the contributions of all the other member countries alone.
The above are meant to illustrate the dimension of the aerospace and defense industry and what opportunities exist for the private sector too. Plenty of companies have become public and yet serve governments in providing products and services needed in the industry. One of the most interesting are Curtiss-Wright Corporation, Mercury Systems, and Lockheed Martin Corporation.
Curtiss-Wright Corporation was founded in 1929 and manufactures a wide range of products used in the aerospace and defense industry, such as weapons handling systems or airlock hatches. The company is also offering maintenance services to the US navy.
The share price trades at an attractive P/E ratio when compared to other listed companies, a ratio forecasted to decline by 2025 and to reach 12.73. Moreover, this is a dividend-paying company that is expected to earn close to $400 million in net profits by 2025. However, the stock price is currently only +12.63% YTD, underperforming the S&P 500 index.
Mercury Systems is another big player in the industry. Founded in 1981, it provides products and services such as digital radio frequency memory units or analog converters.
The stock price went nowhere this year, but the bigger picture shows that the higher lows series suggests more upside. Furthermore, this company operates with a gross profit margin of 41.47%, much higher than the 29.33% sector median.
Lockheed Martin Corporation
Lockheed Martin Corporation was founded in 1912, and it is headquartered in Bethesda, Maryland. It offers a wide range of products and services such as manned and unmanned ground vehicles. The stock price is down by about -4% for the year, but the bigger picture reveals that the decline is only part of a correction.
Most analysts have issued buy ratings for the company’s stock price, with the highest price target ($430) belonging to Morgan Stanley.