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U.S. House Passes 2020 Defense Bill: 4 Stocks to Buy

Zacks Equity Research

The U.S. House of Representatives recently passed a $733 billion defense policy bill, $17 billion short of the proposed Republican-led Senate bill.

The proposal to allocate $17 billion for building a wall on the border with Mexico was voted against by the Democrat-held House, which instead stressed on deploying troops to the border.

Highlights of the Budget Plan

Of the total, $718.3 billion is being kept as funding for the Pentagon, reflecting 4.7% real growth over the initial fiscal 2019 President’s budget. The budget proposal includes critical funding for Overseas Contingency Operations (OCO) and an emergency budget request, totaling $173.8 billion.

It emphasizes on increasing the end strength for the U.S. Army, Navy and Air Force to 33,600, 29.7% over the fiscal 2019 budget. Here, 30,300 are being kept as active components with the largest increase in the Air Force domain, and 3,300 for reserve components, with the highest increase in the Army Guard and Reserve.

Interestingly, the proposed budget reflects increased spending plans of a whopping $57.7 billion on Aircraft, 166% higher than the previous year’s budget. Notably, $34.7 billion has been allotted to Shipbuilding, showcasing an 89.6% surge over the prior fiscal year.

Similarly, spending plans on other domains have seen a rise that includes a higher allotment of $31 billion for multi-domain and nuclear triad, $14.6 billion for Ground Systems, $14.1 for space and $9.6 billion for cyber.

Defense Stocks Likely to Benefit

The expansionary budgetary policy reform, likely to be adopted by the U.S. administration, should encourage investors to add top-performing defense stocks. In line with this, we have shortlisted four defense stocks that have outperformed the Zacks Aerospace sector year to date, possess a Zacks Rank #1 (Strong Buy) or 2 (Buy) and compelling earnings growth expectations. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lockheed Martin Corp. LMT, a Zacks Rank #1 stock, has gained 36.4% year to date compared to the sector's growth of 25.8%. It has an estimated long-term earnings growth rate of 7%.


 

Northrop Grumman Corp. NOC, a Zacks Rank #2 stock, has rallied 31.6% year to date. It has an estimated long-term earnings growth rate of 12.8%.


 

Heico Corp. HEI, a Zacks Rank #1 stock, has gained 77% year to date. It has an estimated long-term earnings growth rate of 13.9%.


 

Wesco Aircraft Holdings WAIR, a Zacks Rank #2, has gained 36.7% year to date. It has an estimated long-term earnings growth rate of 12%.



 

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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
 
Wesco Aircraft Holdings, Inc. (WAIR) : Free Stock Analysis Report
 
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Heico Corporation (HEI) : Free Stock Analysis Report
 
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