5 Best-Performing Defense Companies For Your Stock Portfolio
Like other sectors, the defense stocks have seen their share of winners and losers this year.
Five of the best performers in the sector since the beginning of the year are:
- General Dynamics Corporation (NYSE: GD),
- Lockheed Martin Corporation (NYSE: LMT),
- Orbital Sciences Corp (NYSE: ORB),
- Spirit AeroSystems Holdings, Inc. (NYSE: SPR) and
- TransDigm Group Incorporated (NYSE: TDG).
Three of them, General Dynamics, Orbital Sciences and Spirit AeroSystems, are also among the best-performing defense stocks in the past 90 days. Furthermore, General Dynamics and Lockheed Martin are trading near their 52-week highs, and analysts on average see more upside for all five of them.
General Dynamics is one of the world's largest defense contractors by revenue, and last week it posted better than expected quarterly results. Its market capitalization is about $44 billion and its dividend yield is near 1.9 percent. The long-term earnings per share (EPS) growth forecast is more than 8 percent.
Note that 15 of the 21 analysts surveyed by Thomson/First Call recommend buying shares, with seven of them rating the stock at Strong Buy. The share price is up more than 39 percent year to date and more than 10 percent in the past three months. The stock has outperformed competitors Boeing Co and Textron Inc. in the past six months.
Another of the world's largest defense contractors, Lockheed, won a $4-billion contract to build more F-35 jets last week. It has a market cap more than $57 billion, and a dividend yield of about 3.3 percent. The return on equity is more than 68 percent, and the price-to-earnings (P/E) ratio is less than the industry average.
The consensus recommendation is to hold Lockheed shares, as it has been for at least three months. The stock is about 23 percent higher than at the beginning of the year and seems poised to reclaim the 52-week high that occurred in September. Over the past six months, the stock outperformed rivals Northrop Grumman Corporation and Raytheon Company.
This maker of satellites and launch vehicles was scheduled to launch a rocket delivering cargo to the International Space Station on Monday. Its market cap is less than $2 billion, and the long-term EPS growth forecast is around 15 percent.
Short interest is about 9 percent of the float. All but two of the seven surveyed analysts recommend buying shares, with four of them rating the stock at Strong Buy. Year to date, shares are up more than 26 percent, though they have traded mostly between $20 and $26 since April. Orbital has underperformed all the stocks featured here over the past six months, except for TransDigm.
Strong results are expected when this Kansas-based supplier reports its quarterly numbers next week to other aerospace firms. It sports a market cap of more than $5 billion, but offers no dividend. While the long-term EPS growth forecast is about 17 percent, the return on equity is in the red.
Ten of the 21 analysts surveyed recommend buying shares, and 10 more recommend holding them. The share price is more than 39 percent higher year to date, including a more than 9 percent pop in the past week. The stock has outperformed Lockheed Martin and the S&P 500 over the past six months.
This producer and supplier of engineered aerospace components has a market cap of less than $10 billion. Its operating margin is much higher than the industry average, but so is its P/E ratio. The company announced management changes earlier in the month, and strong quarterly results are forecast as well.
Of the 16 analysts surveyed, 10 of them recommend buying TransDigm shares. The share price is more than 13 percent higher year to date despite not yet fully recovering from a sharp pullback in June. Over the past six months, the stock has underperformed the others featured here, but outperformed competitor United Technologies Corporation.
At the time of this writing, the author had no position in the mentioned equities.
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