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The Zacks Analyst Blog Highlights: Boeing, Lockheed Martin, Huntington Ingalls, General Dynamics and Raytheon

Zacks Equity Research
According to the North Dakota Department of Mineral Resources, the state produced 1,174,769 barrels of oil per day and 2,102,266 thousand cubic feet per day of associated gas in February.

For Immediate Release

Chicago, IL – February 20, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Boeing BA, Lockheed Martin LMT, Huntington Ingalls HII, General Dynamics GD and Raytheon RTN.

Here are highlights from Friday’s Analyst Blog:

Trump Chalks Out Fiscal Budget Plan: 5 Stock Picks

On Feb 12, the Pentagon unveiled the fiscal 2019 budget proposal outlined by President Trump, intended at rebuilding the U.S. military into a more capable, lethal, and geared up Joint Force. Notably, the budget proposal aims at spending $716 billion on national security.

Naturally, the budget presentation sent defense stock rallying higher. Notably, the Dow Jones U.S. Aerospace and S&P 500 Aerospace & Defense (Industry) indices rose 7.2% since the revelation of the budget proposal. 

Highlights of the Budget Plan

Of the total, $686.1 billion is being kept as funding for the Pentagon, reflecting a 5% real growth over the initial FY 2018 President’s budget and 10% real growth over the current Continuing Resolution (CR). The budget includes $617.1 billion as base budget, highlighting a 17.8% increase from the 2018 current CR level and $69 billion for Overseas Contingency Operations.

Notably, the fiscal 2019 budget raises the end strength for the Army, Navy and Air Force by 25,900 (24,100 in active components and 1,800 in reserve components) over the fiscal 2018 budget. The latest budget’s major war fighting investments include spending plans of $21.7 billion on Aircraft, $18.3 billion on Shipbuilding and $5.8 billion on Ground Systems.

Moreover, in the wake of North Korea’s ballistic missile threats, the budget proposal includes an investment plan of $6 billion for varied missile programs.

The budget requests for increased investment worth $10.5 billion on facilities, reflecting a 7% rise over the fiscal 2018 base budget request. The funds will be used for fortifying military infrastructure to increase force lethality and minimize the cost of maintaining unneeded capacity. Also, the budget plan targets continued savings from reforms such as defense travel modernization as well as headquarters reduction by 25%.

Interestingly, the fiscal 2019 budget is the second full budget request from the President, initiating the rebuilding process for the U.S. military that Trump has been consistently emphasizing on. The rebuilding process will involve additional investments in near-term readiness, thereby providing impetus to the programs that suffered due to years of budget cuts.

Stocks in the Limelight

Defense stocks in the United States have been on a solid rally since the beginning of 2018, courtesy of the nation’s conflict with Pakistan. Notably, cross-border tensions escalated between the nations following the United States’ allegation that Pakistan is playing a "double game" with respect to fighting terrorism.

Notably, since Trump’s ascension to the presidency, companies in the Aerospace and Defense space have gained the maximum in comparison to other sectors. The presentation of fiscal 2019 budget proposal has perked up prospects for these stocks, all the more.

In view of this, it seems prudent to focus on defense stocks like the ones mentioned below:

Boeing

Boeing is the largest aircraft manufacturer in the United States. The fiscal 2019 budget proposal has kept provisions for $3 billion investment in 15 KC-46 Tanker Replacements, $2 billion for procuring 24 F/A-18s, $1.3 billion for 60 AH-64E Attack Helicopters and $2.2 billion for 10 P-8A jets. Notably, maximum of the budget provision for Aircraft was allotted for Boeing’s products.

Boeing sports a Zacks Rank #1 (Strong Buy). Its shares have gained 7.1% since the fiscal 2019 budget proposal was released.

Lockheed Martin

The Pentagon’s prime contractor, Lockheed Martin, is the manufacturer of the defense department’s most vital program, the F-35 fighter jet. The budget proposal hints at an increase in Lockheed Martin’s F-35 Joint Strike Fighter program. Notably, the budget has allotted $10.7 billion for procurement of 77 F-35 Joint Strike Fighters.

Moreover, the budget includes an investment plan of $1.7 billion for the procurement of 43 AEGIS Ballistic Missile Defense and $1.1 billion for 82 THAAD missiles.

Lockheed Martin carries a Zacks Rank #2 (Buy). Its share price has gained 5.7% since the release.

Huntington Ingalls

One of the prime beneficiaries of this new spending proposal will be Huntington Ingalls. For more than 100 years, this company has been building ships, aircraft carriers and submarines for the U.S. Navy at their shipyards in Virginia and Mississippi. The fiscal 2019 budget includes incremental funding for nuclear aircraft carriers, CVN-79 and CVN-80. For CVN-78, the budget aims at spending $1.8 billion.

Huntington Ingalls has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company has gained 10.9% since the budget plan was announced.

General Dynamics

General Dynamics owns shipyards and has the resources needed to meet the growing need for naval properties. The latest budget includes $7.4 billion for buying 2 Virginia-Class Submarines, for which General Dynamics is the prime contractor. Moreover, the fiscal 2019 baseline budget submission of $179.1 billion for the Department of the Navy reflects an increase of 4% from the fiscal 2018 budget request.

This in turn will benefit Huntington Ingalls as well as General Dynamics. Further, the budget has kept the scope for an investment worth $2.7 billion for 135 M-1 Abrams Tank Modifications.

General Dynamics carries a Zacks Rank #2. Its stock has rallied 6.3% since the fiscal 2019 budget proposal was released. 

Raytheon

Raytheon is one of the top missile makers in the United States. The fiscal 2019 budget funds for enhancements to U.S. missile defense capabilities. It includes $12.9 billion for missile defense. This in turn surely reflects increased growth prospects for Raytheon.

Notably, the budget includes an investment plan of $1.1 billion for 240 Patriot Missile Segment Enhancements.

Raytheon carries a Zacks Rank #2. Its share price has gained 6.7% since the plan was revealed.

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Boeing Company (The) (BA) : Free Stock Analysis Report
 
General Dynamics Corporation (GD) : Free Stock Analysis Report
 
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
 
Raytheon Company (RTN) : Free Stock Analysis Report
 
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