War Winners: Why The Defense Contracting Business Is Thriving

Zinger Key Points
  • Defense contractors such as Northrup Grumman and Science Applications International have had a great year.
  • War creates a big demand for the products and services offered by defense contractors

The Russian invasion of Ukraine brought new headwinds for the market. Namely, the sanctions on oil and energy exports from Russia pushed the cost of energy to new highs throughout the world.

But, not everyone loses in wartime.

Defense contractors have had a great year. Stocks such as Northrop Grumman Corp NOCLockheed Martin Corp LMT and Raytheon Technologies Corp RTX are up about 47%, 37% and 15%, respectively, year to date, while the S&P 500 index is down nearly 18%.

Science Applications International Corp SAIC is a Virginia-based tech company that provides IT solutions, among its clients is the U.S. Department of Defense.

The company reported strong earnings on Monday, pushing its stock higher. The company also had stronger-than-expected EPS and revenue.

Science Applications International's stock is up more than 30% year-to-date and was currently trading near its 52-week high of $117.94. 

See Also: Lockheed Martin Partners With Israel's Rafael For Laser Weapon System

War Games: One of the most considerable tailwinds for defense contractors during wartime is the increased demand for their products and services. As a country goes to war, its military needs to be equipped with the latest weapons, technology and equipment to succeed on the battlefield. 

This creates a big demand for the products and services offered by defense contractors, who are often called upon to provide everything from tanks and aircraft to communications systems and protective gear, or in Science Applications International’s case — IT solutions. 

Another tailwind for defense contractors during wartime is access to more funding and resources. Governments often increase their defense budgets during times of war, providing defense contractors with more money to invest in research and development, as well as new technologies and equipment. 

SAIC Price Action: Shares of Science Applications were up 0.24% at $114.23 Tuesday morning.

Read Next: Russia's Biggest Tech Company Wants To Cut Ties With The Country: Here's Why

Photo: Gorodenkoff via Shutterstock

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