5 Defense & Aerospace Stocks That Could Be Hurt By Spending Cuts

The Super Committee announced yesterday that it failed to reach an agreement on spending cuts that would reduce the United States' budget deficit. As a result, $600 billion in automatic spending cuts from the defense budget are poised to take place starting 2013, unless the congress ends up reversing its decision.

Benzinga took a look at five U.S. based aerospace and defense companies that are down at least five percent within the past five days and could be hurt more, if the mandatory spending cuts kick in.

1. AAR Corp (NYSE: AIR)
Market Cap $692.7M
Last 5 Days -8.80%

AAR CORP provides products and services to the worldwide aviation and government and defense markets. The stock has been under a lot of pressure since July and recently broke below its 50-day moving average. The company has acquired two other companies since October, which may boost its international growth, but its growth in the U.S. might slow down significantly as the number of military orders decreases.

2. Barnes Group (NYSE: B)
Market Cap $1.3B
Last 5 days -5.78%

Barnes Group is an international logistical services company, and aerospace and industrial components manufacturer serving a range of end markets and customers. The stock is down 5.78% within the past 5 days, but still trading above its 50-day and 200-day moving averages.

The U.S. military is one Barnes Group's clients, so the company may see fewer contracts in the future.

3. Cubic Corp (NYSE: CUB)
Market Cap $1.2B
Last 5 days -7.15%

Cubic Corporation is involved in the design, development, manufacture, integration, installation, operation, maintenance, and support of technology products and systems. The Company focuses on the defense and transportation markets, and cyber security and asset tracking businesses.

The stock recently failed to break above the 200-day moving average, but is still trading above its 50-day MA. Cubic might also be negatively affected by a lower defense budget.

4. Esterline Technologies Corporation (NYSE: ESL)
Market Cap $1.6B
Last 5 days -6.45%

Esterline Technologies Corporation is a manufacturing company serving aerospace and defense customers. The stock is down 6.45% in the past five days and trading below its 50-day and 200-day moving averages.

The company is one of Boeing's (NYSE: BA) suppliers, which may offset the negative effects of the spending cuts.

5. L-3 Communications Holdings (NYSE: LLL)
Market Cap $6.4B
Last 5 days -5.66%

L-3 Communications Holdings is a contractor in Command, Control, Communications, Intelligence, Surveillance and Reconnaissance systems, aircraft modernization and maintenance, and government services. The stock is down 5.66% in the last 5 days and broke below its 50-day moving average last week on a heavy volume. As a provider of government services, the company may be hurt by the spending cuts.

ACTION ITEMS:

Bullish View:
Traders who believe that the congress will not allow the mandatory cuts on the defense budget to take place might want to go long these 5 stocks.
Bearish:
Traders who believe that the spending cuts will not be interfered by the congress may want to decrease their exposure to the defense and aerospace sector or even short some of these names.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.