E 3 Top Defense Stocks To Protect Your Portfolio

Defense stocks have greatly rewarded their shareholders over the last decade. These stocks have hard-to-replicate expertise, which provides them with a wide moat in their business.

Investors who seek attractive long-term returns amid weak competition should consider including defense stocks in their portfolios. In this article, we will analyze the prospects of three defense stocks that are attractive right now.

black android smartphone turned on screen

Image Source: Unsplash

Northrop Grumman Corporation (NOC)

Northrop Grumman is one of the five largest U.S. aerospace and defense contractors. It operates in four business segments: Aeronautics Systems, Mission Systems, Defense Systems, and Space Systems.

The key competitive advantage of Northrop Grumman is its technical expertise, which is hard to replicate. Its platforms have decades-long life cycles and the company benefits from the maintenance and modernization of these platforms. As a result, Northrop Grumman is resistant to recessions. This has certainly proved to be the case during the coronavirus crisis, as the company has posted record earnings in 2020 and 2021. The only material risk of Northrop Grumman is a potential budget cut from the U.S. Department of Defense. This risk has occasionally showed up on the headlines but it has proved minimal over the long run.

In the most recent quarter, Northrop Grumman posted a 4% decrease in its sales due to a tight labor market, many employee leaves, and some supply chain disruptions due to the pandemic. However, the company won $6.9 billion of new contracts and thus grew its backlog to $74.8 billion. Thanks to positive business trends, management raised its guidance for the annual earnings per share from $24.40-$24.80 to an all-time high of $25.20-$25.60.

Northrop Grumman has more than tripled its earnings per share over the last decade. The primary growth drivers have been contract wins, modernization, and maintenance of fleet and share repurchases. In addition, the wide business moat has helped the company grow consistently. Given these growth drivers and the excessive backlog of $74.8 billion, which is equal to two years’ revenues, Northrop Grumman is likely to continue growing its earnings per share at a fast pace for many more years.

1 2 3
View single page >> |

Disclaimer: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities. However, the publishers of Sure ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.