US midterm polls: 3 defense stocks to watch in 2023 - Kalkine Media

November 10, 2022 04:29 AM PST | By Mridul Gogoi
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Highlights:

  • Parsons net income grew to US$ 30 million in Q3 2022.
  • Huntington Ingalls announced a quarterly dividend of US$ 1.24.
  • Heico has a market cap of US$ 21.313 billion. 

The US midterm elections have historically benefitted the stock market, and this time also it could benefit the market, which has remained under pressure this year. Markets often bounce back when the hold of one party begins to dissipate due to shared power. Hence, it results in fewer legislations after the midterm polls.

Several sectors get directly impacted by a change in power or sharing of power, and defense stocks might be the first to feel the difference.

If Democrats retain power, spending on defense might remain moderate, while a tilt of power towards the Republicans can propel defense costs.

Irrespective of the results, the US defense spending is already on the higher side owing to global geopolitical reasons, including the Russia-Ukraine war.

Amid all these developments, let’s explore three US defense stocks- Parsons Corporation (NYSE: PSN), Huntington Ingalls Industries Inc. (NYSE: HII), and Heico Corporation (NYSE: HEI), and analyze their performances in recent quarters:

Parsons Corporation (NYSE: PSN)

Parsons offers tech-driven solutions to the defense, intelligence, and critical infrastructure markets. The US$ 5.077 billion market-cap company is headquartered in Centreville, Virginia.

In its Q3 2022 financial results, Parsons Corporation reported a 19 per cent YoY (Year-over-Year) increase in its revenue to US$ 1,134 million, along with organic growth of 11 per cent compared to the year-ago quarter.

The company’s net income surged to US$ 30 million, an increase of 53 per cent. Its adjusted EBITDA jumped 22 per cent to US$ 103 million in the reported quarter.

The PSN stock gained over 49 per cent on a year-to-date (YTD) basis while increasing over 17 per cent since the past month.

Huntington Ingalls Industries Inc. (NYSE: HII)

The largest military shipbuilding company in the US, Huntington Ingalls Industries, is also a professional services provider to partners in the government and related industries. The US$ 9.6 billion market cap company, Huntington, announced a quarterly dividend of US$ 1.24, which is next payable on December 9 9, 2022.

The company has a dividend yield of 2.077 per cent, and its three-year dividend growth was 12.13 per cent as of writing.

Huntington posted revenues of US$ 2.6 billion in the third quarter of fiscal 2022. Its net earnings for the reported quarter were US$ 138 million or US$ 3.44 diluted EPS (earnings per share).

Huntington’s operating income in Q3 2022 grew to US$ 131 million versus US$ 118 million in the year-ago quarter.

The HII stock rose 27.87 per cent on a YTD basis while gaining over 7.8 per cent in the running quarter. It attained its 52-week highest price of US$ 260.02 on November 1, 2022.

Market capitalization of PSN, HII, HEIKalkine Media® / Source: ©Kalkine Media®; © Canva via Canva.com

Heico Corporation (NYSE: HEI)

Heico Corporation deals in products that are used in spacecraft, aircraft, defense equipment, medical equipment, telecommunications systems, etc. the aerospace and electronics firm has a market cap of US$ 21.313 billion.

The company distributes a dividend of US$ 0.09 on a semi-annual basis. Its dividend yield is 0.115 per cent. Meanwhile, the earnings per share (EPS) of the company was 2.17, while its price-to-earnings ratio was 67.7.

For the third quarter of fiscal 2022, Heico Corporation posted net sales of US$ 569.5 million compared to US$ 471.7 million in the corresponding quarter of 2021.

The company also said its operating income soared 28 per cent in Q3 2022 to a US$ 128.7 million. It was US$ 100.8 million in Q3 2021.

Heico’s consolidated operating margin jumped to 22.6 per cent in Q3 FY22. Coming to net income, the company saw a growth of seven per cent to US$ 82.5 million in Q3 2022. It was US$ 76.9 million in the same quarter the previous year.

The HEI stock saw a QTD growth of over 8.37 per cent, while jumping over 8.1 per cent this year. The last closing price of HEI stock was US$ 156.04 on November 9, 2022, which was over 22.91 per cent higher than its 52-week lowest price of US$ 126.95 on June 23, 2022.

Bottom line:

Defense is one sector that cannot be overlooked, irrespective of the party in power. Defense stocks are known to provide dividends consistently, irrespective of the state of the stock market. Now that the US midterm polls have taken place, the defense sector will also likely witness some changes. While gridlock may be detrimental to the general policies of governance, traders might be secretly happy as there won’t be many hindrances with new policies in the market.

However, the US equity market remained volatile since the start of the year, and investing has been difficult. As an investor, you should always look to have a portfolio, which is diversified enough to stonewall you against any losses. Another key characteristic is to opt for long-term strategies, which can help you weather market volatility and shield your investment. Do thorough market research and analyze the companies’ performances before taking your pick. 


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