Shares of Raytheon Technologies (NYSE: RTX), Lockheed Martin (NYSE: LMT), and General Dynamics (NYSE: GD) witnessed a substantial boost in stock prices, with each of these top defense contractors surging by more than 4% on Monday. This comes as investors are reacting swiftly to the ongoing war in Israel.
Raytheon Technologies, Lockheed Martin, and General Dynamics benefit from the rising geopolitical uncertainty fueled by wars like the one in Israel, increasing demand for defense solutions.
Europe remains mired in a prolonged conflict as Russia’s war with Ukraine shows no signs of ending soon. Simultaneously, heightened tensions in Asia have raised concerns about the possibility of China’s future invasion of Taiwan. Meanwhile, the security situation in the Middle East has deteriorated with Hamas’s incursion into Israel.
Hamas enjoys support from numerous Middle Eastern nations, including Saudi Arabia and Iran, while Israel receives backing from the United States and other Western allies. In addition, the war in Syria continues, with a recent incident involving the downing of a Turkish drone by the United States.
Amid these geopolitical shifts, new alliances are emerging on the global stage. For instance, the BRICS (Brazil, Russia, India, China, and South Africa) have expanded to incorporate nations such as the United Arab Emirates, Saudi Arabia, and Argentina. Russia, China, Iran, and North Korea are also gradually forging new partnerships.
Given these developments, there is a growing likelihood that nations worldwide will boost their defense spending, a trend that will benefit defense giants like Raytheon, Lockheed Martin, and General Dynamics.
The United States has already bolstered its defense budget to over $824 billion, with analysts predicting it may soon breach the $1 trillion mark. Likewise, many European countries have significantly increased their defense budgets in the past few years.
Consequently, these defense companies are expected to sustain their revenue and profitability growth over the long term. Raytheon Technologies (NYSE: RTX), for instance, has witnessed a remarkable surge in revenue, soaring from $34.7 billion in 2018 to over $70 billion in the past four quarters.
Lockheed Martin’s (NYSE: LMT) revenue has also surged, leaping from $53 billion to over $67 billion, while General Dynamics (NYSE: GD) has risen to nearly $41 billion.