Military

3 Defense Stocks to Buy Likely to See Increased Spending After Paris Attacks

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Needless to say, a tragedy like the one in Paris sparked renewed outrage around the world, and numerous countries, including the United States, France and Russia have stepped up their bombing of ISIS targets in the Middle East. One of the key measures of strength in the defense industry is support from Congress, and the vicious attacks in Paris have increased the focus and resolve here and around the world.

With intense bombing campaigns going on now, investors may be surprised to know that a single bomb can cost as much as $1 million, and considering the number dropped on any given day by one country, the sheer dollar amount can be staggering. The top defense companies in the United States focus much of their efforts on the U.S. defense budget, but they also sell to our allies around the world.

We screened the Merrill Lynch research universe for the defense stocks rated Buy and found three that make good sense for growth accounts to consider now.

General Dynamics

This company, like other major defense prime contractors, had a very solid year and makes the list at Merrill Lynch as a top pick stock to buy in the sector. General Dynamics Corp. (NYSE: GD) is a worldwide aerospace and defense company with over 96,000 employees worldwide. It operates through four business groups: Aerospace, Combat Systems, Marine Systems and Information Systems and Technology. The U.S. government is its largest customer, which could continue to bode well.

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General Dynamics stock has awarded its investors with returns of about 160% in the past decade, and the company posted outstanding third-quarter numbers on solid execution across the board. It pays regular dividends and has a share repurchase plan in place. This is an outstanding stock for long-term growth portfolios

General Dynamics investors receive a 2% dividend. Merrill Lynch has a whopping $170 price target, while the Thomson/First Call consensus estimate is $166.75. The stock closed most recently at $142.87.
Lockheed Martin

Lockheed Martin Corp. (NYSE: LMT) is a top aerospace and defense stock to buy, and many on Wall Street are expecting a very solid continuation of U.S. and foreign defense spending. Employing 112,000, the company engages in the research, design, development, manufacture, integration and sustainment of technology systems, products and services. It also provides management, engineering, technical, scientific, logistics and information services. Its Aeronautics segment offers combat and air mobility aircraft, unmanned air vehicles and related technologies.

Lockheed just completed its $9 billion acquisition of Sikorsky, and analysts around Wall Street generally have applauded the deal as the company becomes the world’s largest maker of military helicopters. It also became the maker of the world’s most sophisticated autonomous helicopters, with no clear competition in sight. Both Lockheed and Sikorsky are already transforming airborne logistics for the U.S. military, and they could soon transform airborne logistics for industry as well. This continues a tradition at Lockheed of making bolt-on acquisitions that strengthen the company’s overall product portfolio.

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Investors receive a very solid 3.1% dividend. The Merrill Lynch price target is $250, and the consensus target is $226.53. The stock closed Tuesday at $222.39.

Raytheon

This company has a diversified mix of business and posted solid second-quarter numbers. Raytheon Corp. (NYSE: RTN) is an industry leader in defense, government electronics, space, information technology and technical services. The company operates in four principal business segments: Integrated Defense Systems, Intelligence, Information and Services, Missile Systems, and Space and Airborne Systems

The company is not only likely to benefit from domestic defense purchasing, but it has posted large contract sales to the Saudis over the past two years. Last year Raytheon purchased privately held cybersecurity company Blackbird Technologies for about $420 million. The acquisition will help expand its surveillance and cybersecurity services to clients. Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as cybersecurity and a broad range of mission support services.

Raytheon investors receive a 2.5% dividend. The Merrill Lynch price target is $135, but the consensus target is set at $119.50. The shares closed Tuesday at $123.26.

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Needless to say, no one likes war or conflict, but the reality of the situation is that the United States and its European allies face a very dangerous and ruthless enemy. Between the downing of the Russian airliner and the horrific attacks on Paris, the resolve among nations has been boosted, and the response will continue to be pushed until a positive outcome is achieved.

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