Before I begin my macro prospective I'll give you a couple of fundamental reasons why I like A&D stocks and why I have added to my position in many of the major players (NOC, LMT, RTN) in the last few months. Then I'll begin my geopolitical analysis, and how you may be able to play individual global developments:

1. While Obama has cut the defense budget every year in office, defense stocks have held strong and continued to rally, showing resilience despite decreasing earmarked defense spending
2. While overall defense budgets from countries outside the US (mainly democratic countries in Western Europe) have downsized, such spending has begun to dramatically increase in other countries such as in the Middle East and Asia
3. Increased buybacks
4. Increased dividend hikes
5. Revised guidance to the upside

Another astonishing fact that many people may not know is that America has been "at war" (Let's not get into dramatic specifics as we know only Congress can definitively "declare war." I'm referring to US Troops fighting on either domestic or foreign soil) for 222 out of the 240 years of its existence! Rounding up, that's 93% of the time!!!

However "war" has been part of the animal kingdom long before the United States became a country, and in fact since humans became a living and breathing part of this planet. War is ingrained in human's DNA since we were cavemen, and I don't think that is something that will ever go away. While war may be cyclical, I don't think that you can ever say it will enter secular decline. In fact, global turmoil is more present today then it was when we invaded Afghanistan 15 years ago.

Let's break the analysis down by regions:

North America:

Thankfully no significant military engagements have been active in this region. However, years of gun violence in the United States have brought attention to how we handle precarious situations and whether guns are the right answer to deal with potentially lethal situations. Body cameras to hold police accountable, and non-lethal weapons have been touted as the safer option to guns. Other countries like England, which already have extremely strict gun policies in which citizens cannot own a pistol (nor can police unless they are the British equivalent of SWAT) have begun to look for products that can serve their needs.

Way to play it:

So a potential investment idea to fit this theme is Taser (NASDAQ:TASR). It is one of the dominant players in the wearable body camera and Taser products' market with growing domestic and international orders.

Another stock is AeroVironment (NASDAQ:AVAV). They are the number one producer of small drones for military and civilian purposes. I believe the application for drones on US soil by police will become more important as the technology advances. Police will be able to use them to survey a potential target possibly with infrared technology so they incur limited damages upon a raid or sting operation.

Central America:

Mexico:

Mexico is completely controlled by the cartels. While the arrest of the infamous Joaquín Archivaldo Guzmán Loera (AKA El Chapo Guzmán) was a big moral win, this doesn't change the equation. If anything, things may become much worse as rival cartels seek to expand their power via extreme violence (e.g., "The Godfather" of Mexico exits the scene). I'm also not so convinced that it isn't possible that he escapes again. While there is no "war" going on here, you could certainly say that it is pretty close. The most powerful cartels in Mexico include the Los Zetas (a new powerful cartel that has paramilitary capabilities due to the fact it is all ex-military), Gulf Cartel, Sinaloa Cartel, Knights Templar, Beltran Levya Cartel, and Jalisco Cartel.

South America:

Colombia:

People often forget that the communist, left-wing FARC has been waging guerilla warfare on the Colombian government since the mid 1960's (continuing until today). While they are currently in peace talks, nothing is assured, and sporadic attacks continue throughout the "peace" process. While Cartel's have shrunk since the reign of Pablo Escobar, they are still a large part of the country's makeup accounting for much of the organized crime.

Brazil:

Unlike the previous two regions cited above, there is no super organized crime group in Brazil. However, the criminality inside of the Favela's are strong, and while they have been trying to combat crime with special SWAT-like groups, crime is still rampant. All you have to do is watch " Cidade de Deus" to get a good sense of what it is like there, and you should because it is a great movie. The possible impeachment of the Brazilian president is shaking up the government which may lead to greater destabilization.

El Salvador:

While originally from LA, MS-13 has taken a stranglehold on El Salvador. MS-13 is mostly made up of ethnic Salvadorian immigrants in LA who were returned to their host country due to illegal immigration status in the late 80's, 90's and today. From 1979-1992 civil war raged in the country, which allowed the newly returned immigrants to take their new-found criminal skill set to create a highly organized gang culture within their home country without law enforcement pressure. From there, they expanded across the US, as well as internationally.

Honduras:

Most people don't know this, but Honduras actually has the highest murder rate of any nation in the world! Many assert that the large increase in violence occurred after the 2009 coup d'état. For every 100K people, ~90 people die. That's a startling statistic!

Venezeula:

Most people think of Venezuela as an oil rich country; but, like most of Latin America, the leftist populists has undermined the region's democratic institutions and wrecked its economies for the last 15 years. Hugo Chavez ran the country into the ground. Riots and looting broke out in several blacked-out cities last week, forcing the deployment of troops. Citizens are looking to oust their president, blaming the socialist government's policies for the current economic crisis (I don't disagree with them; it's time they finally woke up and saw that socialism doesn't work), the shortage of staple goods in many shops, and a lack of food, medicine, water and electric power. There has been an increase in organized crime, and a decline in state policing as the murder of police, military, and private security officials are on the rise.

Peru:

Similar to Colombia, but not as well known, Peru has been fighting communist left-wing guerillas since the 1980's, known as the Shining Path. Shining Path guerrillas killed at least 10 military and civilian personnel in an ambush in Peru's central state of Junin on Saturday. The attack came one day before the April 10 elections in the VRAEM, the central jungle region home to the majority of Peru's coca production. The Shining Path provides security for drug-trafficking gangs in exchange for money and weapons (those communists sound like great people fighting hard for their goals, don't they? Maybe Bernie will take a page out of their playbook?). Interestingly, Peru has overtaken Colombia as the number one producer of cocaine in the world. However, on Monday Peru's equivalent of El Chapo (Gerson Galvez) was arrested in Medellin at a shopping center. It's always funny how these high-level crime bosses are arrested while nonchalantly strolling in public places.

Way to play it:

The biggest problem for governments in both Central and South America is trying to locate guerrillas and coca fields in the dense jungles, or cartels hiding out in the desert. Israeli companies are some of the best drone producers in the world, and, with much less restrictions on arm sales than the US, it gives them a leg up when compared to the United States. Israel has a particularly strong presence in Latin American markets due to a legacy of robust arms trade between themselves and regional governments throughout the turbulent 1980's, especially Brazil. I continue to see Elbit Systems (NASDAQ:ESLT) as a dominant player in the drone market internationally, but also in South America. It has performed extremely well, sports a 1.5% dividend, and will continue to get more products as needed for their products' surge internationally.

Africa:

Nigeria:

Today when people think of terrorism in Africa, they think of Boko Haram, the newest Islamist militant group plaguing Central Africa. They became well known after they pledged their allegiance to ISIS, and captured hundreds of schoolgirls, threatening to enslave and kill them. They quickly expanded to the East, causing international concern. However, Nigeria and neighboring countries have taken the fight seriously, forming an informal coalition to fight and drive back the insurgents. The coalition of Nigeria, Niger, Chad, Cameroon, and UN forces have been able to make a big dent in Boko Haram's operations, but the battle is far from over.

Somalia:

Most people think of Somalia as the place where pirates troll the waters looking for ships to loot (as in the recent movie "Captain Phillips", a really good movie!). However, this country has been a mess since the early 1990's when a large civil war broke out. Our president at the time, Bill Clinton, sent in troops to end the violence (the Battle of Mogadishu). The operation was meant to be an overnight event, but ended up continuing into the next day as Clinton underestimated the grit of some of the Somalis. Under intense US public pressure, Clinton subsequently pulled troops out, which left a huge vacuum and chaos that allowed the city to fall into ruin, and for terrorist cells to emerge (similar to the story of how ISIS unfolded after we pulled out from Iraq). In my opinion, Clinton missed the opportunity to clean up the country and did not have the stones to stick it out. Al-Shabaab became active in the early 2000's pledging allegiance to Al-Qaeda. This group has terrorized the country for over a decade. There have been some recent successes, as the military takes a stronger stance on combatting the group, coupled with US drone strikes driving them from the urban centers into the countryside. The group is weaker than it was only a few years ago, and has had internal strife as some members wish to pledge allegiance to ISIS, while the founders wish to remain loyal to Al-Qaeda. In desperation, Al-Shabaab has gone from coordinated attacks to sporadic bombing techniques to non-specific terrorism (inciting fear without a specific target). While progress is being made, the fight is far from over.

Libya:

In 2011, the Arab Spring had swept through Northern Africa overturning the rulers of Tunisia and Egypt, and the influence would expand into Libya. Libyans decided that they too would try to overthrow their dictator Muammar Gaddafi. Unfortunately, we didn't learn our lesson from Iraq. The US helped the "rebels" overthrow the government by supplying them with weapons, and conducted airstrikes. This allowed them to kill Gaddafi and take over. However, instead of a new democratic government carrying the day, violence continued as armed militias vied for power in the war torn country. One thing I have learned from studying modern political developments in the Middle East and many Islamic theocratic governments is that a military dictatorship is preferable to the subsequent sectarian violence and anarchy that ultimately ensues. Countries accustomed to dictatorship for centuries are unable to make the "desired" transition to democracy in a viable and meaningful way. It may be a sad thought, but the truth is that while the citizens are usually very repressed, the dictator does a very good job at cracking down on Islamic extremists, insurrections, and crime, and maintaining law and order in what otherwise would be (and will be!) an anarchic war-lord controlled jungle. The unfortunate side effect is that political rivals, and religious minorities usually suffer the consequences such as the Kurds under Saddam Hussein's rule; but nothing is perfect in life. As civil war has continued, ISIS found an easy entry point into a country without a leader and has now been recognized as garnering support there. They are among many forces competing for territory around Tripoli and northern Libya.

Way to play it:

The US is adamant about not getting too involved in Libya, so I believe the best place to allocate money for the African continent is Northrop Grumman, as we continue to use drones for surveillance and strikes primarily in Nigeria and Somalia, and Lockheed Martin as we use F-18 Super Hornets, and the soon-to-be-deployed to combat new F-35 Lightening II.

Middle East:

Iraq/Syria:

I've combined these two countries, because, at this point, they aren't really two separate countries. They are two regions without a border controlled by various groups. I recommend you watch this video as it is the best video I have seen thus far at explaining the complicated proxy war going on in Syria and Iraq, but for now I will provide a short summary here:

In 2011, as the Arab Spring spread across the Middle East, Syrians became angry with their dictator as well, and decided to try to overthrow Bashar al-Assad. These people were known as the Free Syrian Army, or moderate rebels, and had early success against Assad and pro-government troops. Al-Qaeda then developed an affiliate in Syria known as the Al-Nusa Front, which also is fighting Assad and occasionally the moderate rebels in North/Western Syria. Saudi Arabia and other gulf nations look to further their interests in the country and helped to finance the rebels. Iran then became nervous about losing a Shia ally in the region to a predominantly Sunni area and sent part of the Iranian Royal Guard to help Assad with strategy as well as fighting on the ground. It also helped send money and aid to Lebanon, which then sent Hezbollah (categorized as a terrorist organization by most democratic countries in the world) to help Assad fight the rebels and Al-Nusra Front. Radical Islamic extremists from Iraq who had been lying dormant after they were pushed out of Iraq then emerged on the scene as a powerhouse attempting to carve out their own piece of Syria and create a Caliphate. They were also able to take back part of Iraq and seize US weapons from the Iraqi military. The situation further evolved as the Kurds in the northeast of Syria took the opportunity to try to break away into an autonomous region, which they had wanted for years. They are now fighting Assad, moderate rebels, and ISIS. Turkey, which had been fighting its own small insurrection against the Kurds in its country, began bombing the Kurds in Iraq and its own country to assure that the Kurds would not be able to destroy the border between Syria and Turkey (as ISIS did with Syria and Iraq) and create one large region ruled by the Kurds. With Assad gaining some ground back with help from Iran and Lebanon, the US helped finance moderate rebels to overthrow Assad. Putin, with oil interests in the region, felt he must come in to counteract the US' influence by coming to the aid of Assad and by bombing some ISIS targets, but mostly moderate rebels claiming that Russia was targeting all "terrorists". I actually agree with Putin here because by letting Assad fall, the country will turn into greater chaos than it is in today and become the next Libya. It's funny how we never learn the same mistake; a dictator is always a better option to run a Middle Eastern country than the fantasy of a liberal democracy with Western views in an established Eastern world. The absurdity continues as ISIS and Al-Qaeda had a falling out in 2015, which then led to ISIS battling with the Al-Nusra front. The fighting has become so complicated it is truly difficult to understand the alliances and objectives of the parties involved (even with a scorecard!).

Things are looking worse in Baghdad these days. Dozens of supporters of radical Shiite cleric Moqtada al-Sadr breached the walls of Iraq's heavily guarded International Zone on Saturday, burst into the country's parliament chambers and attacked a senior lawmaker. This came hours after an ISIS car bomb killed dozens in the capital. Moqtada al-Sadr looks like an increasingly important player in the Iraqi political landscape, as he is able to control the will of the people. The cleric made an unannounced visit to Tehran Monday for reasons unknown. Since the Sunni Sadam Hussein's demise, the mainly Shia/Shiite Iraq has grown closer with Iran. However, some have stipulated that Iran may try to take over Iraq. They have gone to war numerous times, and Iran could invade Iraq under the pretense of trying to bring stability to the region.

Yemen:

Yemen has not been in the spotlight like many of the other countries mentioned above, but it has certainly had its problems. Yemen has been plagued by an Al-Qaeda affiliate known as AQAP (Al-Qaeda in the Arabian Peninsula), which has launched many attacks on the capital from its stronghold in the South/Southeast. The government has been in shambles for quite sometime, and recently fell in January of 2015. Houthi rebels backed by Iran swept into the presidential palace and took over the government after a brutal mortar campaign on the government. Not wanting a heavy Shia influence in the region, Saudi Arabia sent its Royal Air force into combat to bomb the Houthis, who are simultaneously fighting pro-government forces, AQAP, and now ISIS. The Obama administration has conducted many drone strikes in the region, but this has not stopped the onset of extreme violence in the region. Similar to Syria, Yemen has turned into a battlefield of epic proportion as ISIS has now entered the fray looking to cash in on the instability and carve out its own territory. Here is another great article for more detail on the Yemeni crisis.

Way to play it:

Similar to Africa, I believe the way to invest for this region is Lockheed Martin and Northrop Grumman. Americans are tired of war, and more especially US troops coming home wounded. If we are to continue to play an active role in this theatre it will be with fighter jets, and drones.

Caucasus:

Armenia & Azerbaijan:

The Caucasus has been conflicted since the fall of the USSR. They were, at one point, along with Georgia, part of a unified country known as the Transcaucasian Federation (prior to World War I, eventually incorporated into the USSR after World War II). Armenia and Azerbaijan have had a very hostile relationship since Stalin incorporated the countries into the USSR. Stalin set up an autonomous region known as Nagorno-Karabakh within Azerbaijan of ethnic Armenians, which would lead to an eventual referendum in the 1980s to join Armenia. The referendum passed, but Azerbaijan rejected it, leading to a bloody war between the two countries. Armenia invaded Azerbaijan to "defend its people," taking a lot of territory in the process. Eventually Russia would broker a cease-fire, with the outcome of Nagorno-Karabakh declaring de facto autonomy, practically the same place it was in before the war.

On April 1 2016, clashes between Armenian and Azerbaijani troops occurred on the border, resuming a decades old conflict. While the two have signed a temporary truce, skirmishes have continued. Russia and Iran have entered the picture now trying to help broker peace talks, but in my opinion this is only the first step in aggressive behavior. I believe that The Caucasus is getting ready to be carved up by the surrounding superpowers salivating at this opportunity.

Here is how I believe it would be carved up:

Azerbaijan is invaded by Iran under the pretense of helping its Shia Muslim ally. While Turkey does have strong relations with Azerbaijan, it is mostly a Sunni Muslim country.

Armenia is then invaded by Turkey. While Russia has the Christian ties with Armenia, Turkey has a much longer "relationship" with Armenia. The Ottoman Empire once controlled the region and imposed authoritarian laws on its citizens, even going so far as ethnic cleansing (the "Armenian Massacre"). Turkey has disdain for the country, and I could easily see it taking the opportunity to invade the country and re-impose its will.

Finally, Russia will take Georgia, Chechnya, and Dagestan. Putin has already shown his boldness by invading Crimea and eastern Ukraine, and may use this opportunity to expand the boundaries of his country. Russia has had problems keeping control of Chechnya, a region with violent Muslim extremists, and has repeatedly sent in troops to quell the violence in the 90's. It also sent troops into Georgia in the mid 2000's to help South Ossetia secede from the rest of Georgia. Dagestan has also proved to be quite troubling for Russia, becoming a breeding ground for anti-Russian Muslim extremists (similar to that of Chechnya). Putin would love to expand his border all the way to the Armenia-Azerbaijan border.

Whether Turkey, Iran, and Russia would peacefully settle up with their new territories, or go on to a free-for-all for all of The Caucasus, is beyond me. Regardless war is brewing in the region.

Way to play it:

The last thing the United States wants is to put boots on the ground going head to head with Russian troops. The way to discourage Russian involvement in the region is Raytheon. Raytheon builds the famous Patriot Missile System, a best in class SAM (Surface to Air Missile) capable of taking down fighter jets, as well as other missiles and mortar shells. The US already has Patriot SAM's scattered across Poland, and I could see them doing the same in Western Ukraine (with permission) to discourage Russia from advancing further into Ukraine or more south into the Caucasus.

The "Stans":

I truly believe that Putin is looking to expand the borders of the Russian Federation to the previous borders of the USSR, or possibly even further. A recent report by the WSJ says Russian security forces may be ready for "rapid deployment" to Tajikistan. Russia has warned of a rise in violent extremism, as the Taliban crosses across the porous border between Afghanistan and Tajikistan. Most of the Stans rely on Russia for both trade and military support.

Afghanistan:

The Taliban is back. While we killed many members in the early and mid 2000's, and pushed the rest of them back deep into the mountains, they have remained resilient. While we focused our attention on Iraq and other emerging conflicts, the Taliban took their time to re-group in neighboring Pakistan. They have remerged this year looking stronger than ever, with car bombs, attacks on the capital, and blitzkrieg-like advances on the poppy fields where they make most of their money through the sale of poppy to be refined as heroin. Fighting between the Taliban, local warlords, and US and international troops in the region have reignited in recent months.

Way to play it:

For me this was a hard one to decide. I ended up going with Lockheed Martin and Boeing. Lockheed makes the Black Hawk Helicopter (recently acquired from UTX), and Boeing (NYSE:BA) manufactures the Apache Helicopter. Helicopters were a big part of our invasion of Afghanistan and Iraq. While it looks like the US is committing more to airstrikes in Iraq, I don't believe those would be as effective in Afghanistan and other Stan countries. They are much more rural and mountainous and require precision attacks best carried out by state-of-the-art attack helicopters.

Indian Subcontinent:

India & Pakistan:

The Kashmir region has been contested since Pakistan declared independence from India in 1947. The area is very valuable because it is where Cashmere wool is sheared from the goats. This Cashmere can be used to make extremely expensive Pashmina shawls. The region is also often used to grow Saffron, a valuable cooking spice. Recently, gunfire was exchanged on the border between the two countries. China has also taken a small part of Kashmir, but is not really a player in this region. With India looking to become an economic force like that of China, and Pakistan growing more and more unstable due to rising Islamists, this is an area of the world that looks like it may escalate to a more volatile situation.

Way to play it:

General Dynamics (NYSE:GD) is the producer of the A1 Abrams Tank, Minigun, and Stryker APV. Were a skirmish to occur between the two, it would most likely be on the ground, benefitting General Dynamics. While both countries are nuclear, I doubt the nuclear option is on the table. Orbital ATK (NYSE:OA) may be another defense stock to invest in for this region. Orbital ATK builds satellites which have been getting more and more military contracts. The US will want to keep an eye on what's going on in this area of the world, especially between two nuclear powers, and China having a small dog in the fight. Satellites will help them track live movements of enemy forces.

East Asia:

This region has too many participants to pinpoint any particular countries.

The South China Sea has become a hotbed issue. Brunei, China, Taiwan, Indonesia, Singapore, Malaysia, Philippines, and Vietnam are all claiming both island and maritime rights. Laos and Cambodia have come out in support of China, with Thailand mute. Japan has rejected China's claims to sovereignty as it aggressively claims territories. Japan, which has no formal military due to the sanctions following World War II, has been increasing spending on its "defense force".

What many people don't know is that Indonesia has the largest Muslim population in the world, numbering 230 million. Indonesia has a long history of terrorist attacks. In January, a terrorist attack occurred in the capital of Jakarta in which ISIS took responsibility, demonstrating its reach from Europe to the Middle East to South East Asia. The attack was carried out by Jemaah Islamiyah, a radical Islamic terrorist group that has pledged allegiance to ISIS. They are dedicated to the establishment of a Daulah Islamiyah (regional Islamic caliphate) in Southeast Asia.

Equally concerning is the group Abu Sayyaf, a terror organization located in the Philippines which has been active for years. They have had a long-standing partnership with Al-Qaeda, but recently broke their allegiance to pledge to the newer more powerful ISIS.

While South East Asia has never been a battleground like the Middle East, I am very concerned. The combination of fighting for claims in the South China Sea, along with increased radicalization of the major South East Asian countries (Singapore, Malaysia, Philippines, Indonesia), may lead to increased destabilization with severe repercussions.

South Korea recently purchased around a billion dollars worth of surveillance drones from Northrop Grumman to keep an eye on North Korean activities as North Korea heats up its ICBM testing. This is another looming development that may lead to international conflict. The North/South Korea situation is not just a situation between the two countries, but a proxy war between China and the United States. America supports South Korea, and to some extent China supports North Korea. I think China has become more nervous of Kim Jong Un and North Korea in recent years, but they are willing to put up with their alarming behavior as long as it means keeping the US at bay. If the US were to take out Kim Jung Un, and lead South and North Korea to a democratic Korea, it would be very unsettling for China having the US knocking on its doorstep.

Way to play it:

Huntington Ingalls Industries (NYSE:HII) is the largest military shipbuilder in the US. They build combat ships and submarines, and, with heightening issues in the region, naval warfare is likely to be the venue of engagement.

General Dynamics and Lockheed Martin also build newly developed combat ships known as Littoral Combat Ships [LCS] that are agile, multi purpose war ships.

Orbital ATK is a good idea because the US will want to have an eye (literally) on what's going on in real time via satellite feed.

Northrop Grumman produces UAV's/drones, which countries like Japan may look to buy. These drones are also able to land on battle ships which make them extremely valuable.

Raytheon (through acquisitions) now has a robust cyber security unit. China has been engaged in a cyber security war with us, continually hacking our government's systems. Raytheon will begin earning both defensive and offensive cyber contracts to keep China in check. Raytheon also produces Air-to-Air missiles. These will become important as US Destroyers position themselves in the Sea of Japan near the border of North Korea, allowing them to shoot down possible ICBMs (InterContinental Ballistic Missiles) that North Korea plans to launch.

Company Financials:

Northrop Grumman:

Northrop reported 1Q EPS of $3.03, ahead of a $2.60 estimate, which included a ~$0.45 tax benefit. While revenues and margins were flat this quarter, Northrop's cash flow outlook will benefit from a relative lack of required pension contributions over the next few years, and the win from major projects such as the B3 Bomber. A growing cyber, and drone unit will help push revenues to an estimated $23.7B in revenue this year. Northrop Grumman has also been quiet on the M&A front compared to it's peers and may look to go hunting with an increased focus on defense spending.

Lockheed Martin:

Reported 1Q16 EPS of $2.58 vs. Street $2.39 estimate with the results including a ~$0.21 impact from severance charges in the quarter at the Aeronautics and IS&GS businesses. The company increased its guidance for the year for sales (+$100m), EBIT (+$125m), EPS (+$0.05), and cash flow from operations (+$100m). Shares are trading roughly at 15x 2017 free cash flow EPS. Lockheed has been a staple in peoples portfolios for those looking for A&D, Industrials, or high yield dividend allocation. It will continue to do well for this reason, as well as a greater emphasis on increasing the defense budget.

Raytheon:

International sales continue to grow as a percent of total revenues, accounting for ~31% of sales in 2015 - compared to 29% in 2014 (and 27% in 2013). Raytheon's international business remains a key point of differentiation with more upside potential from international sales than downside given the heightened threat environment and the perception among Middle East customers that the U.S. deal with Iran could destabilize the region longer-term - further fortifying demand for missile defense. The company has an average target price of $140 based on shares trading at roughly 17x 2017 EPS estimates and 17.5x average free cash flow over the next three years.

Orbital ATK:

Orbital ATK currently trades at ~15x earnings vs. ~ 17 xs for the large-cap defense industry average indicating that the stock is still relatively cheap from a valuation standpoint. In February, Garrett Pierce, the Chief Financial Officer of OA, emphasized expected positives going forward: consolidated revenue growth of ~4-5% on a compound annual growth rate [CAGR] basis, including growth due to revenue synergies in 2016 and 2017; EBITDA growth of ~8-10% ; earnings per share growth of ~12-15%; cumulative three-year free cash flow of ~$1 billion and cost synergies of the merger totaling $150 to $200 by late 2016 or early 2017. You can see more on my full analysis of the company here.

Huntington Ingalls:

Huntington reported 1Q EPS of $2.87, versus Street estimate of $2.15, driven by an ~$18m tax benefit (~$0.40 in EPS), and better than expected revenue and margin performance at Ingalls. Revenues at Ingalls grew ~25% y/y, compared to a 5% y/y estimate, driven by higher volumes in Surface Combatants and Amphibious Assault ships (partially offset by softer revenue in the NSC program). Ingalls operating income nearly doubled y/y driven by a ~14.0%, which management attributed to performance improvement and higher risk retirement on the LPD and DDG programs. These were partially offset by softer than expected margin performance at Newport News, which was driven by lower risk retirement on the VCS program, lower volume on CVN-72 and softer performance on CVN-78.

Conclusion:

Unfortunately, the world looks much more macabre today than it even did 10 years ago. There are large developments afoot all around the world, and things look like they are going to continue to get worse, not better. There has always been war, and there always will be war. As long as that is the case, I am bullish on the defense sector, and with the rise of global turmoil, I will continue to invest in A&D stocks as the need for defense products rises. While I believe almost all the stocks listed in this article (and the defense sector as a whole) stand to benefit from an increase in global spending on defense, the stocks I have most conviction in are listed under the "Company Financials" segment. To decrease risk through diversification, or to play the defense sector as a whole, one can look at the major Aerospace & Defense ETF's: PPA, ITA, and XAR.