Geopolitical tensions have escalated as Western allies prepare for a military confrontation between Russia and Ukraine. The U.S. Department of Defense said that about 8,500 American troops are on heightened alert for immediate…
action if Russia does invade Ukraine.
The United States has been seeking to stave off the potential invasion, with high-profile discussions between President Joe Biden and his Russian counterpart Vladimir Putin. “One nation can’t force another nation to change its border; one nation cannot tell another to change its politics,” Biden told the Russian leader. He also stated that the United States is ready to impose economic penalties if military action increases. On the other hand, China’s ambassador issued a warning to the United States last week that it could face “military conflict” with China over the future status of Taiwan.
Although geopolitical uncertainty continues to rattle investors, this bodes well for defense stocks as governments increase military purchases to strengthen their capabilities. Given this backdrop, major defense stocks Raytheon Technologies Corporation (RTX – Get Rating), Lockheed Martin Corporation (LMT – Get Rating), and L3Harris Technologies, Inc. (LHX – Get Rating) could be ideal bets now. These stocks are already outperforming the broader market.
RTX operates as an aerospace and defense company, providing systems and services for commercial, military, and government customers worldwide. It operates through four segments: Collins Aerospace Systems; Pratt and Whitney; Raytheon Intelligence and Space; and Raytheon Missiles and Defense.
Last month, Collins Aerospace, an RTX business, closed a deal with Boeing Company (BA) to be their long-term provider of next-generation lavatories for the 737 family of aircraft. It is expected to be available by the beginning of 2025. This long-term deal should enable the company to garner significant revenues. Boeing also selected Collins Aerospace to upgrade the aircraft with a new electric power generation system (EPGS).
Last month, RTX announced the repurchase of up to $6 billion of the company’s outstanding common stock, increasing existing shareholders’ returns.
RTX’s net sales increased 3.8% year-over-year to $17.04 billion in the fiscal fourth quarter ended December 31. Its operating profit grew 829.6% from the year-ago value to $1.32 billion, while its adjusted net income improved 43.9% year-over-year to $1.61 billion. Its adjusted EPS increased 46% from its year-ago value to $1.08.
Street expects the company’s revenue to increase 5.1% year-over-year to $16.03 billion in the fiscal first quarter ending March 2022. The consensus EPS estimate of $1.04 indicates a rise of 16.1% year-over-year. Also, RTX has an impressive earnings surprise history as it beat Street EPS estimates in each of the trailing four quarters.
RTX shares have gained 35.2% over the past year and 4.8% over the past month to close its last trading session at $90.19.
RTX’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
RTX is also rated a B in Growth and Stability. Within the Air/Defense Services industry, it is ranked #8 of 74 stocks.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the RTX’s Value, Momentum, Sentiment, and Quality ratings here.
LMT operates as a security and aerospace company. The company engages in the research, development, manufacture, integration of technology systems, products, and services worldwide. It operates through four segments: Aeronautics; Missiles and Fire Control; Rotary and Mission Systems; and Space.
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