As we’re unfortunately aware, one of the most significant geopolitical crises in recent years has been Russia’s invasion of Ukraine and the subsequent adverse effects. After the U.S. government withdrew its soldiers from Afghanistan, defense stocks were once thought to be unappealing in the short term.
However, as the wealthiest nations in the world spend more on military and defense, these stocks are starting to look much more attractive. One reason is that they’ve held up well throughout the market choas. An example is that in contrast to the S&P 500 – which has lost more than 17% of its value in the last three months – the iShares U.S. Aerospace & Defense ETF has only decreased by 3.80%. This frees up some chances to properly “buy the dip.” The numbers indicate that the defense sector has less work to do than other industries in order to recover and stabilize. I’ve settled on three I think are most appropriate right now,, and economists agree that these can be timely investments when the market is down.
Join me while I break down my picks from the defense sector. I mainly tried to focus on upside potential and resilience despite the pandemic, but they’re also buy-rated and pay dividends:
Raytheon Technologies Corp (RTX)
Raytheon Technologies Corp (RTX) is a U.S. multinational aerospace and military firm based in Waltham, MA. Based on sales and market capitalization, RTX is one of the world’s major aerospace, intelligence services, and military manufacturers. RTX conducts advanced tech research, development, and manufacturing in said industries, including aircraft engines, aerostructures, avionics, guided missiles, cybersecurity, air defense systems, drones, and satellites. RTX is also a principal military contractor, with the U.S. government accounting for a sizable amount of its income. RTX is the outcome of a merger of equals in April 2020 between United Technologies Corporation’s subsidiaries and what’s now RTX.
Management has considered a potential increase in more orders for RTX‘s military equipment in the coming years, and it ambitiously aims for a free cash flow of $10 billion by 2025. RTX has an impressive run of besting analysts’ earnings projections (especially on EPS), most recently beating EPS by 13.11% and revenue by 5.72%. RTX has a consensus price target of 112.00, with a high estimate of 130.00 and a low of 103.00 among the analysts providing annual price estimates. The median forecast is a 20.11% gain over RTX’s last price, and it comes with a well-earned, dependable buy rating. RTX presently has a dividend yield of 2.34%, with a quarterly payout of 55 cents per share.
General Dynamics Corp (GD)
Based on sales, General Dynamics Corp (GD) was the sixth-largest defense contractor globally and the fifth-largest in the U.S. as of 2019. GD, included in the Fortune 100, was placed 83rd in 2020. GD, which was founded in 1954 as a result of the merger of two aircraft and submarine manufacturers, Canadair and Electric Boat, now has activities in 45 countries and at least ten subsidiary businesses. GD‘s products include Gulfstream business jets, guided-missile destroyers, nuclear-powered submarines, and other weapons. GD had more than 100,000 full-time workers and $37.9 billion in worldwide revenues in 2020. GD is headquartered in Reston, VA, and was founded in 1952 New York City.
Because it is such a flexible contractor, GD has been producing consistent revenue growth over the last few years and has a massive backlog of $87.2 billion. Furthermore, GD is a top U.S. government military contractor, with the Department of Defense accounting for most of its revenue. GD’s financials are as strong as its weaponry. GD has been on a hot streak on the EPS front, surpassing Wall Street’s earnings forecasts quarterly. On its latest, GD beat EPS and revenue projections by 3.75% and 4.12%, respectively. The consensus price target for GD from analysts providing 12-month price estimates is 269.00, with a high of 305.00 and a low of 221.00. The median estimate reflects a 25.67% gain over current pricing, and GD has a military-strength-level buy rating. GD currently has a dividend yield of 2.35%, with an impressive quarterly payout of $1.26 per share.
Olin Corp (OLN)
Olin Corp (OLN) manufactures and sells chemicals. OLN produces many chemicals. A small sample of many would include chlorine, caustic soda, ethylene dichloride, methylene chloride, carbon tetrachloride, and perchloroethylene – just a cleaning solvent, as it turns out –. OLN also specializes in epoxy materials, such as allyl chloride, epichlorohydrin, and liquid epoxy resins. OLN also, carrying out its role as a government contractor, creates and provides industrial cartridges, small-caliber military ammunition, reloading supplies, and sporting ammunition. Franklin W. Olin founded OLN in 1892, and its headquarters are in Clayton, Missouri.
OLN runs a healthy operation that has been successful throughout the years. OLN’s average increase in EBITDA – Earnings Before Interest, Taxes, Depreciation, Amortization, etc. – over the last five years has been more than 45%. Furthermore, OLN has raised its full-year EBITDA prediction to $2.9 billion, a $300 million increase from earlier first-quarter expectations. OLN shows positive year-over-year growth in crucial areas: Revenue – 28.28%, Net Income – 61.33%, EPS – 64.24%, and Net Profit Margin – 25.75%. Analysts’ forecasts indicate further growth both quarterly and annually. OLN has a consensus price target of 73.50, with a high of 100.00 and a low of 52.00, according to the analysts that provide annual price estimates. The estimate implies a 50.12% gain over the previous price, and OLN’s resilience has undoubtedly paid off, as it comes with a strong buy rating that we should all consider. OLN has a dividend yield of 1.63%, with a quarterly payout of 20 cents per share.
