Escalating geopolitical tensions worldwide has proven the importance of having a strong defense. The recent attack on Israel will likely drive nations to increase their defense budgets.
Given the industry’s long-term prospects, it could be wise to buy fundamentally strong defense stocks L3Harris Technologies, Inc. (LHX – Get Rating), OSI Systems, Inc. (OSIS – Get Rating), and Northrop Grumman Corporation (NOC – Get Rating).
Before diving deeper into their fundamentals, let’s discuss what’s happening in the defense industry.
The global defense industry is being shaped by increasing defense spending by developed and emerging nations, primarily for strengthening their air defense systems. Growing geopolitical instabilities and the evolving nature of warfare contribute significantly to the anticipated growth of the air defense system market worldwide.
Ukraine’s war with Russia last year has underscored the need for countries to strengthen their military and air defense capabilities. In 2022, global military expenditures rose by 3.7%, reaching $2.24 trillion. Moreover, the recent attack on Israel by militant group Hamas will likely prompt nations to increase their defense spending.
U.S. defense spending is projected to reach $886 billion in 2023. Additionally, the Department of the Air Force has requested a year-over-year budget increase of 11.7%, totaling $194 billion. Also, the aerospace and defense market is anticipated to reach $1.08 trillion by 2027, growing at a 5.9% CAGR.
Moreover, technological breakthroughs are enhancing the effectiveness of missile and air defense systems. The integration of radar systems, artificial intelligence, and analytics has accelerated threat identification and interception, fundamentally reshaping the landscape of modern warfare and propelling the sector’s growth trajectory.
Considering these conducive trends, let’s analyze the fundamentals of the three Air/Defense Services picks, beginning with…
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