In an incredible turn of events last weekend, it was reported by various news outlets that a four-star U.S. Air Force general said in a letter that his gut told him the United States would fight China in the next two years. Of course, Pentagon officials immediately pushed back on the general, saying that those comments were not in line with current American military assessments.
The mere fact that a startling assessment like that from a high-ranking officer could even be released is more than a little unnerving. When you combine the potential for war with China and a drawdown of U.S. armaments due to the military aid being sent to Ukraine, the big defense companies could be in for some massive demand. That is, demand far and above the current needs for the U.S. military.
With the Russian-Ukrainian war now grinding into its second year, not only are arms and heavy equipment being hustled to Ukraine, but many American allies have taken the aggression from Russia very seriously and are adding to their own arsenals. The Japanese ruling party has called for the doubling of defense spending in the wake of Chinese saber-rattling over Taiwan, and European allies are trending the same way.
We screened our 24/7 Wall St. defense and aerospace research database looking for the top companies with Buy-rated stocks and that pay solid and dependable dividends. The following six top companies hit our screens. It is important to remember though that no single analyst report should be used as a sole basis for any buying or selling decision.
General Dynamics
Like other major defense contractors, General Dynamics Corp. (NYSE: GD) looks poised to deliver solid numbers and guidance. It is engaged in business aviation, land and expeditionary combat vehicles and systems, armaments, munitions, shipbuilding and marine systems, and information systems and technologies.
Major products include Virginia-class nuclear-powered submarine and Ohio class replacement, Arleigh Burke-class Aegis, Abrams M1A2 tank, Stryker 8-wheeled assault vehicle, medium-caliber munitions and gun systems, tactical and strategic mission systems.
The company just reported fourth-quarter results that were in line with expectations on the top and bottom lines.
Investors receive a 2.22% dividend. Citigroup’s $268 price target on General Dynamics stock is a Wall Street high. The consensus target is $268.00 as well, and shares closed on Tuesday at $233.06.
Huntington Ingalls
Spun off from Northrop Grumman in 2011, this is a premier military shipbuilding company. Huntington Ingalls Industries Inc. (NYSE: HII) engages in designing, building, overhauling and repairing military ships in the United States.
The company is involved in the design and construction of non-nuclear ships, comprising amphibious assault ships, expeditionary warfare ships, surface combatants and national security cutters for the U.S. Navy and U.S. Coast Guard. It also provides nuclear-powered ships, such as aircraft carriers and submarines, as well as refueling, overhaul and inactivation services of ships.
In addition, Huntington Ingalls offers naval nuclear support services, including fleet services comprising design, construction, maintenance and disposal activities for in-service of U.S. Navy nuclear ships, as well as maintenance services on nuclear reactor prototypes.
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