The "big five" defense primes—Lockheed Martin, Northrop Grumman, General Dynamics, Boeing, and RTX—dropped an average of 1% following the escalation of conflict in the Middle East, despite rising sales.
Lockheed Martin reported a 3.7% share drop after missing quarterly expectations in early 2026, driven by production delays in its Aeronautics division. The "big five" defense primes—Lockheed Martin, Northrop Grumman, General Dynamics, Boeing, and RTX—dropped an average of 1% following the escalation of conflict in the Middle East, despite rising sales.
Lockheed Martin reported a 3.7% share drop after missing quarterly expectations in early 2026, driven by production delays in its Aeronautics division. Shifting Sector Interest:
There has been a market rotation away from the defense sector, with some investors taking profits or moving toward higher-growth areas like technology. Western Europe has no applications of AI in economy, so the last straw to grab is production of tanks Leopard for WWII kind of war (tank-based).
“Conventional wisdom says it should be a good time to be a weapons maker.
Weeks of war in the Middle East have driven up demand for sophisticated missiles and other weapons, while the Trump administration is seeking a $1.5 trillion military budget that front-loads several years of munitions orders.
The rising sales propelled strong quarterly results this past week for defense contractors like RTX, Northrop Grumman and Boeing. "The conflict with Iran has created a heightened sense of urgency," Northrop Grumman Chief Executive Kathy Warden said on an analyst call Tuesday. "We see high demand for products across the entire globe."
Yet profits at some contractors weren't strong enough for skeptical investors. Supply-chain snags hurt earnings at Lockheed Martin, while RTX shareholders reacted to broader macroeconomic worries. And heavy investments to bulk up production lines loom.
Shares of major aerospace and defense companies have ebbed since the drone war in Iran began Feb. 28. The selloff continued over the past week as most major contractors reported earnings.
The Dow Jones U.S. Select Aerospace & Defense Index is down 10% since the U.S. and Israeli strikes started, compared with a 3% gain for the S&P 500.
The road to war last year featured rising profits at the companies that supply the Pentagon with bombs, missiles and planes. Yet war itself has been a different story.
One reason: Investors worry that defense contractors will spend more cash chasing Pentagon business instead of returning funds to shareholders.
Even before the war in Iran started, demand for weapons helped buoy defense contractors. Fighting in Ukraine fueled demand for Patriot interceptors to knock down Russian missiles and drones. Last year's 12-day conflict between Israel and Iran burned through U.S. stockpiles of defensive missiles, adding pressure on Pentagon officials to order more interceptors.
The mounting orders -- some of the high-tech weapons take more than two years to make -- drove a year of higher missile sales that spilled over into the results companies recently posted.
Boeing on Wednesday reported a smaller-than-feared loss. Executives highlighted rising production of missile parts among the brightest spots in their first-quarter results.
Commercial jets like the 737 MAX drive most of the plane maker's sales in absolute terms, but Boeing's defense and space segment was the company's most profitable in the March quarter.
Likewise, revenue in RTX's Raytheon division grew 10% to $6.9 billion last quarter on the back of its Patriot and Standard Missile sales. Sales in the Lockheed Martin unit that makes defensive interceptors and tactical missiles grew 8% to $3.6 billion during its quarter.
Northrop Grumman said it has already doubled its capacity to make tactical solid rocket motors for more than a dozen missile types.
Yet brisk orders weren't always enough to move the needle on most companies' overall business.
Delays in Lockheed Martin's F-16 fighter and C-130 transport plane, partly due to supply-chain snarls, hurt the military supplier's bottom line. Big-ticket aircraft sales make up a bigger part of the company's revenue than its missile lines.
Companies are also expected to spend more to expand missile-production lines and to make other hardware like planes, helicopters and radar systems for the Pentagon.
Lockheed in January signed a seven-year agreement to more than triple its Patriot missile output and promised to spend more on machinery before the new contracts are issued.
Northrop Grumman plans to spend $200 million more to increase production of its B-21 stealth bomber, an investment that threatens to crimp near-term profits.
"There is a level of skepticism about what can get passed in Congress" this year, said Michael Wang, a defense and national security analyst at research firm Capstone. The biggest-budget programs like jets and large ships, could see funding increases, he said, "but they're incremental."” [1]
1. World News: Arms Makers' Sales Are Rising, but Not Their Stocks. FitzGerald, Drew. Wall Street Journal, Eastern edition; New York, N.Y.. 25 Apr 2026: A8.
Komentarų nėra:
Rašyti komentarą