3 Defense Stocks Gearing Up for a Strong Fourth Quarter
Dipping into the world of defense stocks to buy unveils a bastion of robust, long-term opportunities for investors. U.S. defense contractors are renowned for their stability. These stocks often bask in the security of lucrative government contracts and innovative technologies, ensuring a powerful investment terrain. Their resilient intellectual property rights and a history of consistent top-line expansion only sweeten the proposition, allowing them to weather financial storms.
Notably, these defense giants don’t just guard nations. They effectively protect investor interests with attractive dividends. While the pandemic forced many companies to cut or suspend dividends, numerous defense entities elevated their payouts, exhibiting resilience against the economic tumult. Thus, defense stocks emerge not just as shields against global threats but also as sturdy vessels navigating through the economic landscape. With that said, let’s look at three of the best defense stocks to buy for Q4.
Northrop Grumman (NOC)
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For the discerning investor, Northrop Grumman (NYSE:NOC) serves as a formidable beacon in the defense landscape. With its tentacles spread across progressive realms, including hypersonics and the burgeoning space industry, NOC boasts an incredible long-term growth trajectory. Even with a recent dip in its share price, the company’s robust market capitalization, hovering over $60 billion, and its unwavering commitment to shareholder value paint a compelling investment picture.
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The company is gearing up to potentially double its free cash flow by 2028. This growth will be propelled by a pivot to fixed-price revenue of 60% of sales by 2027 and expansion into international terrains. Adding zest to this bullish narrative, the escalating global geopolitical undercurrents, especially those stemming from powerhouses including China and Russia, amplify the significance of NOC’s diversified defense arsenal. These sentiments are echoed in its Q2 earnings report, flaunting an impressive order backlog of $78.8 billion and net awards of $10.9 billion. Additionally, it boasts a staggering dividend profile, with 19 consecutive years of payout growth while yielding 1.7%.
AeroVironment (AVAV)
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Amidst the tumultuous global conflicts, AeroVironment (NASDAQ:AVAV), a leading drone manufacturer, boasts a future punctuated with boundless growth opportunities. The protracted Ukraine conflict and the growing involvement of the U.S., extending beyond financial aid to deploying Abrams tanks and supplying driverless surveillance drones, have somewhat elevated the risk of a direct clash with Russia. However, the grimness of war may lead to a lucrative chapter for AeroVironment, with a remarkable 40% surge in second-quarter revenue to $152 million and a staggering 361% ascension in net income, fueled by robust product sales.
AeroVironment’s diverse array of pilotless drone units, enabling militaries to confront adversaries from a safe distance, has proven to be pivotal in the Ukrainian war. The firm’s devices have enabled allies to effectively fortify Ukraine’s defenses without directly deploying soldiers. Coupled with a 27% year-over-year increase in a funded backlog of $540 million, the company has artfully blended innovation with pragmatism, crafting a stable investment vista amidst global upheaval.
Lockheed Martin (LMT)
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Lockheed Martin (NYSE:LMT) boasts a titanic presence in the global aviation and defense sectors, crafting iconic fighter jets while venturing into diverse military gear and a blossoming satellite and space business. Moreover, LMT ensures its offerings span widely across the ever-fluctuating defense and weaponry trends. Its space division adds an additional layer of high-growth potential atop its solid terrestrial operations, presenting a well-rounded investment prospect.
Maryland-based Lockheed Martin provides advanced military aircraft development and manufacturing along with air-to-ground precision strike weapon systems and tactical missile and air defense systems. Its F-35 program looks particularly promising. It constituted a hefty 27% of total sales and a substantial 66% of the Aeronautic segment’s net sales last year. Furthermore, with the U.S. and its allies, such as Israel, placing a substantial order of 25 F-35 jets and President Joe Biden’s $886 billion request for 83 F-35 aircraft gaining approval, the horizon seems bright for LMT.
The company wrapped its most recent quarter with a 5.3% increase in its backlog from the December quarter to a record $158 billion. This financial vigor, coupled with a historic backlog and revving revenues, positions the company to grow its dividend past the 20-year mark.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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