US defense spending may be shrinking, but new technologies from these top military stocks are set to offset smaller budgets and still bolster America’s military might…
According to the US Department Of Defense, procurement budgets for 2014 is expected to drop by more than 17% from what was spent in 2012.
Budgets on weapons and other equipment are being slashed across the board, including the Army, Navy and Air Force.
Most notably, the Army will be seeing a 33.6% spending drop in 2014.
From the onset, this looks quite jaw-dropping.
But that doesn’t mean that President Obama is closing up the purse strings completely. Quite the contrary in fact.
The overall budget for the Department is expected to remain around the same as 2012 ($526 billion)…the only difference is that the bulk of the money will be going towards rising pay and benefits instead.
So the mantra here is trying to do more with less.
Wherever possible, the Department intends to modernize and upgrade existing systems and equipment.
But while the DoD won’t be shelling out as much money as it has in the past, that doesn’t mean that their suppliers are getting caught with their pants down.
In fact, three of the biggest names in military equipment are going to be closing out the year with record performances.
Their strategy? They’re all going global…
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Lockheed Martin (NYSE:LMT) has had an incredible run so far in 2013, and isn’t appearing to be slowing down anytime soon. Last week, it surpassed Hewlett-Packard as the 92nd largest company by market capitalization.
And new contracts continue to pour in for LMT.
Most recently, the company clinched a massive $4 billion deal with the Pentagon to supply missile defense equipment to the US and the UAE.
The contract entails Lockheed’s Terminal High Altitude Area Defense (THAAD) missile defense system that’s designed to intercept ballistic missiles in midair.
There will be 192 interceptors for the UAE and up to 110 interceptors for the US Army. By combining the orders from both the US and the UAE, the DoD saves about 10% in expenditures.
Other countries have also shown strong interest for THAAD systems, including Qatar, Saudi Arabia, Japan and South Korea, which could lead to more lucrative contracts for LMT in the coming months.
The Boeing Company (NYSE:BA) may be experiencing a bit of a slow-down in new contracts from the US government, but has seen its footprint grow significantly internationally.
By successfully penetrating markets in China, India, UAE and Australia, Boeing has garnered impressive returns over the past year.
In fact, Boeing has gained over 70% since last September while Lockheed’s still-impressive performance, clocked in at just over 41%.
One of the Company’s biggest customers now is the Government of India, as India pushes for further diversification in its defense purchases. In past years, the Indian Government relied mostly on the Russians for their military requirements.
Last fall, Boeing secured a contract worth $2.4 billion that will see it deliver 15 Chinook CH-47F heavy-lift helicopters and 22 AH-64D Block III Apache helicopters to India over the course of this year.
For General Dynamics (NYSE:GD), the US Government remains a profitable client. Though the Navy budget is down in 2014, it’s only a slight dip from 2013. As such, contracts for GD’s submarines and their other fleet of vehicles are expected to stay strong.
Existing long-term contracts with the DoD are still estimated to be worth $78 billion for their attack submarines and $140 billion for their ballistic missile submarines.
What’s more, they are winning contracts for consistent maintenance work, such as $52 million in upgrades to the nuclear submarine USS Mississippi and the $49 million contract to modernize the US Marine Corps’ Range Training Systems (RTSs).
But General Dynamics is also looking beyond US shores. Just last week, they won a $188 million contract from Saudi Arabia to upgrade 44 M1A1 Abrams tanks and 40 M1A2 Abrams tanks. Prior to that, they secured $36 million from the UK Ministry of Defence (MoD) for 24 Foxhound light tactical blast-protected vehicles.
Looking at the company’s meteoric climb this year, it’s set to end 2013 on a high note similar to Lockheed and Boeing, with shares rising to levels not seen since 2008.
It’s bullish times ahead for defense stocks.
Even with the world’s most powerful military taking its foot off the spending pedal, these companies appear to be doing just fine – if not better.
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