Amid escalating geopolitical tensions, global economies are constantly prioritizing military and security concerns, leading to an increase in defense spending. Further, aerospace and defense companies are embracing new advanced technologies and innovation to capitalize on growth opportunities.
Against the backdrop, it could be suitable to invest in fundamentally sound defense stocks, L3Harris Technologies, Inc. (LHX – Get Rating), BWX Technologies, Inc. (BWXT – Get Rating), and Kaman Corporation (KAMN – Get Rating) for potential gains in 2024.
Global military spending has surged steadily in the past few years due to growing geopolitical tensions, including the recent Israel-Hamas war, Russia’s invasion of Ukraine, and tensions in the South China Sea. In 2023, defense expenditure in the U.S. stood at $746 billion. Further, U.S. defense spending may reach $1.10 trillion by 2033.
Major defense companies expect a solid demand in 2024 as the U.S. and its allies seek to load up on expensive weaponry and munitions amid perceived increased aggressive actions from Russia and China. Thus, ongoing wars have boosted the profit outlook for the aerospace and defense (A&D) industry this year.
US Congress has approved a whopping defense budget of $886 billion for 2024. It also has extended a controversial overseas electronic surveillance system widely used by U.S. intelligence services. This spending bill offers billions of dollars to “enhance US deterrence and defense posture in the Indo-Pacific region” and counter China’s rising influence there.
Digital transformation in the A&D industry is further critical to optimizing production, enhancing maintenance, and driving innovation. Recent technological advancements include industrial sensors to track machine performance and potential quality issues, digital twin technology, advanced automation technology, inventory monitors, and AI/ ML technology.
In light of these favorable trends, let’s look at the fundamentals of the best three Air/Defence Services stocks, beginning with number 3.
Stock #3: L3Harris Technologies, Inc. (LHX – Get Rating)
LHX is an aerospace and defense technology company that offers mission-critical solutions for government and commercial customers internationally. The company operates in three segments: Integrated Mission Systems; Space and Airborne Systems; and Communication Systems.
On November 27, 2023, LHX announced the signing of a definitive agreement under which an affiliate of TJC L.P. will acquire L3Harris’ Commercial Aviation Solutions (CAS) business for $800 million. The transaction is expected to close in the first half of 2024.
“Today’s announcement is consistent with our multi-year strategy to optimize our national security, technology-focused portfolio,” said Christopher E. Kubasik, Chair and CEO at L3Harris. “Aligned with our capital allocation priorities, we plan to use the proceeds from this transaction to repay debt, which will accelerate our timeline to reach our debt leverage objective.”
On September 12, LHX and BAE Systems (BAESY – Get Rating), a part of a global defense, aerospace, and security company, delivered the first of 10 EC-37B Compass Call aircraft to the U.S. Air Force for formal combined developmental and operational testing.
The next-generation system will assist the Air Force’s 40-year mission of employing electromagnetic attack (EA) capabilities to support U.S. and coalition air, surface, and special operations forces.
During the third quarter that ended September 29, LHX reported revenue from product sales and services of $4.91 billion, representing growth of…
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