WASHINGTON: With U.S. military strikes top and center in the news, readers have been introduced to some of the most advanced and powerful weaponry built by aerospace and defense companies. Because of the complexity of government procurement processes, the use of certain missiles doesn’t necessarily mean the makers of those weapons will benefit from near-term increases in sales. But it’s helpful for investors to know which contractors have been most successful recently, and which are most favored by analysts.
Tomahawk cruise missiles, manufactured by Raytheon Co. RTN, +0.26% were used against a Syrian airfield on April 6. The Massive Ordinance Air Blast (MOAB), or “mother of all bombs,” is made by Boeing Co. BA, -0.24% and was used against Islamic State terrorists in Afghanistan last week. Raytheon is the fourth-largest U.S. defense contractor, with a market capitalization of $44.5 billion, while Boeing is the biggest player, with a market cap of $106.8 billion. There are 28 aerospace and defense companies in the S&P 1500 Composite Index, which comprises the large-cap S&P 500 SPX, -0.68% the S&P 400 Mid-Cap Index MID, -1.11% and the S&P 500 Small-Cap 600 Index SML, -1.16% The industry’s stocks as a group are up 7% this year, with dividends reinvested, while the S&P 1500 is up 4%.
Since Donald Trump was elected president Nov. 8, the aerospace and defense industry group has risen 15%, compared with 10% for the index. Trump has said he wishes to increase defense spending by 10%, or by $54 billion. It remains to be seen if the president will get his way, but the stock market tends to be forward-looking, and the recent action shows investors believe favorable times are ahead for defense contractors. Here are several sets of data showing which companies have excelled and which are favored most by Wall Street analysts.
