The U.S. has many public defense and government services contractors, so investors have a lot of options when it comes to this industry. Here we’ll share the top three defense stocks which we think have the highest growth potential.
1. Northrop Grumman Stock
Northrop Grumman Corporation (NYSE: NOC) is a multinational aerospace and defense technology corporation headquartered in the U.S. It offers services and security systems such as aviation, information systems, and electronics to clients all over the U.S. It also leads the way in the development of manned and unmanned aircraft, as well as electronic warfare systems.
The company’s second-quarter results were top-notch, reflecting the strength of its portfolio and its orientation with homeland security objectives. It released its 2021 Q2 reports, which stated that sales increased $267 million, or 3%, to $9.2 billion, owing primarily to higher sales at Space and Mission Systems. Organic sales increased 10% year-over-year (YoY). In addition, Northrop increased its 2021 sales guidance from $35.8 billion to $36.2 billion, and its earnings per share (EPS) guidance from $24.40 to $24.80.
Northrop Grumman recently launched Cygnus, a resupply spacecraft, to the International Space Station, along with a special delivery of pizza for the seven crew members. It also plans to deliver roughly 8,200 pounds of science and research equipment, crew supplies, and vehicle hardware.
Unrest between the United States and the Taliban has had no negative effects on Northrop Grumman stock yet. However, we must wait and see what effect it has on the stock in the coming weeks.
2. Viasat Inc.
Viasat Inc. (NASDAQ: VSAT) is a much less well-known defense company that is experiencing fast increases in stock value. It is a global communications firm that offers broadband digital satellite communications and wireless networking services. It also provides network control systems, information distribution systems, modems, terminals, and other products.
Viasat announced in late April that it had completed its acquisition of RigNet Inc. (RNET) for approximately $222 million in December 2021. RigNet is a supplier of highly secure, intelligent networking solutions and specialized applications.
The company grew its revenue 25% YoY due to top-line increases across all segments and the acquisitions completed during the quarter. It also disclosed that its Q3 net income grew over 4% YoY, and Adjusted EBITDA increased 21% as margins expanded over 480 basis points (bps) YoY. Not only that but also year-to-date (YTD) Government Systems awards reached $978 million and backlog increased over $1 billion, up 12% YoY.
Viasat has already started offering residential internet services in Brazil and has built connectivity in Nigerian villages, allowing it to spread connectivity across the continent. The firm is also preparing for the launch of ViaSat-3, a global satellite constellation with three ultra-high-capacity communications satellites that will serve Africa, Europe, and the Middle East in 2022.
3. Raytheon Technologies Stock
Raytheon Technologies (NYSE: RTX) is an aircraft manufacturer that provides aerostructures, mechanical systems, aircraft engines, radar, and many other services.
Raytheon Technologies was formed in early April 2020 when Raytheon, a leader in defense electronics and missile specialists, merged with United Technologies, an innovator in aircraft engines and a variety of other aerospace parts. This merger made it one of the world’s largest aerospace and defense companies, with approximately $74 billion in 2019 net sales and a global team of 195,000 employees, including 60,000 engineers and scientists.
Recently, the company released their Q2 financial report which looked very strong, reporting sales of $15.9 billion. It also repurchased $632 million worth of its shares The company also earned $1.04 million in net income from continuing operations.
With the emergence of a coronavirus pandemic in 2020, Raytheon’s business struggled, particularly in commercial aviation, where it battled with Pratt & Whitney and Collins. It hurt the engine makers’ aftermarket businesses in particular, as a result of airlines grounding older planes. This had a knock-on effect on its cash flow, which fell to $1.64 billion, the lowest level since 2011. As a result, its share price suffered but the company is starting to recover and the stock is up almost 10% over the past six months, which took some time to recover.
Defense stocks are great investments, but there are plenty of other great opportunities in MyWallSt’s shortlist of market-beating stocks. Access them by starting your free access today.
Contributing Writer at MyWallSt
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