International pressure is gradually mounting for a military
strike on Syria in the wake of a chemical weapons attack in a
Damascus suburb. If this happens, it would bring a much needed
boost to the domestic defense and aerospace industry, which was
under the constant threat of sequestration and budget cuts.
The Obama administration claims that the Syrian government fired
rockets loaded with nerve gas on opposition-controlled parts of
the Damascus suburbs on Aug 21, 2013. That attack reportedly
killed 1,429 people, including 426 children. Against this act of
terror the Obama administration is trying to marshal domestic
support for a U.S. led air strike against the Bashar al-Assad
The U.S. aerospace and defense stocks have lately been hit by
fears of automatic budget cuts resulting from sequestration. Now
that President Obama is increasingly gaining support for a
military strike against Syria from both Republican and Democratic
leaders, heady days may finally be back for defense stocks again.
This is particularly true if ground troops are ruled out while
Pentagon beefs up firearms for the proposed military air strike.
3 Players to Make Most of Syria
Given a choice of 3 defense stocks that are likely to benefit
from this situation, we would suggest the following names:
Lockheed Martin Corp.
Northrop Grumman Corp.
). All the three stocks sport a Zacks Rank #2 (Buy).
Waltham, Mass.-based Raytheon's Tomahawk cruise missile is said
to be President Barack Obama's weapon of choice. Tomahawk has
become an important weapon in the U.S. defense arsenal for its
precise capability to take out high value target from a very long
distance. These missiles have a range of 1,000 nautical miles
(1,150 statute miles) and can be launched both from surface and
submarines. The latest version, Block IV, has a satellite link
that enables it to hover over the battlefield as it awaits target
Meanwhile, the U.S. Department of Defense has also increased its
orders on Tomahawk that could prove to be a windfall for
Raytheon. The company registered a boost in net Tomahawk sales of
$32 million during the second quarter 2013 on a year-over-year
basis. Hence, Raytheon is expected to bolster its bottom line
from the latest potential conflict. This has also pushed the
company's stock price to a new 52-week high of $77.93 on Aug 26,
Given the Syrian army's 4th Armored Division, the U.S. could use
fighter planes such as Lockheed Martin's Joint Air-to-Surface
Standoff Missile, and the Joint Standoff Weapon made by Raytheon,
besides the use of cruise missiles. While both have shorter
ranges than the Tomahawks, the advantage lies in the fact that
these could be launched from outside Syrian airspace.
Among other possible weapons, Northrop Grumman's B-2 bomber might
also be used. Designed and manufactured by Northrop Grumman along
with the assistance of yet another defense major
The Boeing Co.
), this bomber is also known as the Stealth Bomber. B-2 is the
flagship of the nation's long range strike arsenal and one of the
world's most survivable aircraft. Northrop Grumman is the Air
Force's prime contractor for the B-2. It can fly unrefueled for
more than 6,000 nautical miles and over 10,000 nautical miles
with just one aerial refueling. It has already proven its
capabilities in many combat circumstances whether in the recent
Operation Iraqi Freedom or during Operation Odyssey Dawn in
Shares of Raytheon, Lockheed Martin and Northrop Grumman are
trading at an attractive 13.4x, 13.1x and 12.0x the estimate for
2013, and their share prices have gained approximately 31.6%,
37.6% and 40.4%, respectively, so far this year.
BOEING CO (BA): Free Stock Analysis Report
LOCKHEED MARTIN (LMT): Free Stock Analysis
NORTHROP GRUMMN (NOC): Free Stock Analysis
RAYTHEON CO (RTN): Free Stock Analysis Report
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