RTX to NOC: Top defense stocks to explore amid US-China tensions

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RTX to NOC: Top defense stocks to explore amid US-China tensions

 RTX to NOC: Top defense stocks to explore amid US-China tensions
Image source: © Vadimmmus | Megapixl.com

Highlights:

  • RTX stock rose about eight per cent YTD.
  • General Dynamics Corporation (NYSE: GD) posted a revenue of US$ 9.18 billion in Q2 FY22.
  • S&P 500 Aerospace and Defense Sub Index increased by more than six per cent YTD.

The mounting tensions between US and China impacted the global market, as seen in the market performance. House Speaker Nancy Pelosi's arrival to Taiwan despite warnings from Beijing has added to geopolitical turmoil.

The geopolitical tensions due to Moscow's invasion of Kyiv and Western sanctions on Russia have already dragged down the market this year.

China was also in the headline for quite some time due to its pandemic-led lockdowns as they have already disrupted the global supply chain.

With the increasing tensions, the investors could explore opportunities in the defense sector. Raytheon Technologies Corporation (NYSE: RTX), General Dynamics Corporation (NYSE: GD), Northrop Grumman Corporation (NYSE: NOC), Lockheed Martin Corporation (NYSE: LMT), and Boeing Company (NYSE: BA) are among the major players in the sector.

In addition, the second quarter earnings season has also fuelled traction of the stocks. Several defense firms have already posted their quarterly earnings, indicating how they have performed amid the choppy first half performance of the broader market.

Let's take a closer look at the stocks and evaluate their recent performances amid rising geopolitical turmoil.

Raytheon Technologies Corporation (NYSE:RTX)

The aerospace and defense conglomerate firm had a dividend yield of 2.36 per cent, while its annualized dividend was US$ 2.20. The dividend yield is the annual dividend received from an investment divided by the current share price of the asset.

The US$ 137.98 billion market cap firm has been recently in the limelight following its second-quarter earnings release. It posted a three per cent year-over-year (YoY) growth in its Q2 FY22 revenue of US$ 16.3 billion. Its net income rose a quarter per cent to US$ 1.30 billion in the second quarter of fiscal 2022, from US$ 1.04 billion in the year-ago quarter.

Its earnings per share (EPS) improved 28 per cent YoY to US$ 0.88 in Q2 FY22, from US$ 0.69 in Q2 FY21.

RTX stock showed gains of nearly eight per cent this year while soaring about five per cent in one year. 

General Dynamics Corporation (NYSE:GD)

Stock of another major aerospace and defense firm, General Dynamics, gained about eight per cent year-to-date (YTD) while showing gains of nearly 13 per cent in the past 12 months. In the current quarter, it ticked up over one per cent.

It noted a 52-week low of US$ 188.64 on November 30, 2021, while its 52-week high was US$ 254 on March 7, 2022.

General Dynamics had been awarded a contract of about US$ 698 million from the US Navy for repairing, maintenance, and modernization of the submarine USS Hartford, the company said on July 29.

On July 20, it received a US Navy contract of about US$ 273 million for supporting the development, production, and installation of fire control solutions for ballistic missile submarines.

The Reston, Virginia-based firm reported net earnings of US$ 766 million on revenue of US$ 9.18 billion in the second quarter of fiscal 2022. Its revenue for the latest quarter decreased by 0.3 per cent from US$ 9.20 billion, while its net earnings rose 3.9 per cent from US$ 737 million in Q2 FY21.

Northrop Grumman Corporation (NYSE:NOC)

Northrop Grumman focuses on offering solutions for space, aeronautics, defense, and other related fields. The firm holds a market cap of over US$ 73.67 billion.

NOC had a dividend yield of 1.45 per cent, while its annualized dividend stands at US$ 6.92. NOC stock returned gains of over 22 per cent this year, and on a YoY basis, it surged 30 per cent.

The Falls Church, Virginia-based defense firm reported net earnings of US$ 946 million, or US$ 6.06 per diluted share, on a total sale of US$ 8.80 billion in Q2 FY22.

Top defense stocks to explore amid mounting US-China tensionsSource: ©Kalkine Media®; © Canva via Canva.com

Lockheed Martin Corporation (NYSE:LMT)

Lockheed Martin specializes in aerospace, arms, defense, information security, and other related services. Its dividend yield was 2.67 per cent, and its annualized dividend was US$ 11.20.

LMT stock returned gains of nearly 19 per cent YTD while increasing over 14 per cent in the last 12 months. However, on a quarter-to-date (QTD) basis, it fell by nearly two per cent.

The company posted net sales of US$ 15.44 billion in Q2 FY22, down from US$ 17.29 billion in the year-ago quarter. Lockheed Martin's net earnings deteriorated to US$ 309 million, or US$ 1.16 per diluted share in the fiscal 2022 second quarter, from an income of US$ 1.81 billion, or US$ 6.52 per diluted share in Q2 FY21.

Boeing Company (NYSE:BA)

BA stock lost about 18 per cent this year amid several challenges in the broader market while declining about 28 per cent in one year. However, it rose by about 20 per cent in the ongoing quarter.

The aerospace firm noted a 52-week low of US$ 113.02 on June 14, 2022, and it touched a 52-week high of US$ 241.15 on August 12, 2021. It holds a market cap of about US$ 97 billion.

The Arlington, Virginia-based firm recently came into the news after it reportedly got preliminary clearance from the US regulators from the aviation department (Federal Aviation Administration) for restarting deliveries of its 787 Dreamliners.

In Q2 FY22, its net earnings were US$ 160 million on revenue of US$ 16.68 billion. In the same quarter of the previous year, its net earnings totalled US$ 567 million on revenue of US$ 16.99 billion.

Bottom line:

The aerospace and defense segment appears to be maintaining stable trading in recent months. S&P 500 Aerospace and Defense segment rose over six per cent YTD while soaring nearly four per cent QTD. On the other hand, the Dow Jones US Aerospace and Defense index gained about five per cent YTD while adding about four per cent QTD.

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