Raytheon (RTX), Lockheed Martin (LMT), and General Dynamics (GD) stock prices popped in the pre-market session as investors reacted to the ongoing war in Israel. The three big defense contractors, part of the military industrial complex, jumped by more than 4% on Monday.

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Raytheon, Lockheed Martin, and General Dynamics will be the biggest beneficiaries as the world moves into a less safe place. In Europe, Russia is in a long war with Ukraine, a situation that could continue for years.

Meanwhile, in Asia there are elevated risk that China will invade Taiwan in the next few years. At the same time, the Middle East is becoming a less safe place after Hamas invaded Israel. 

Hamas is backed by many countries in the Middle East like Saudi Arabia and Iran while Israel is being supported by the US and other Western countries. A war is still happening in Syria, where the US downed a Turkish drone last week.

At the same time, new alliances are being formed. For example, BRICS has now been expanded to include countries like the UAE, Saudi Arabia,  and Argentina. Russia, China, Iran, and North Korea are also slowly becoming partners.

Therefore, there is a likelihood that countries will continue boosting their defense spending, a move that will benefit defense companies like Raytheon, Lockheed Martin, and General Dynamics.

The US has already boosted its defence budget to over $824 billion and analysts believe it will cross the $1 trillion level. Similarly, many European countries have boosted their budgets in the past few years.

As a result, these companies are expected to continue their revenue and profitability growth in the long term. Raytheon Technologies has seen its revenue growing from $34.7 billion in 2018 to over $70 billion in the past 4 quarters. 

Lockheed Martin’s revenue has moved from $53 billion to over $67 billion while General Dynamics has risen to almost $41 billion. Other international defence contractors are also doing well. BAE Systems and Rolls-Royce Holdings will be key beneficiaries, as I wrote here. Other companies to watch will be Northrop Grumman, L3Harris, and General Atomics.

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