Four defense stocks to watch as global conflicts continue

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By Ben Levine for Kapitall.

The death toll of the Israeli-Palestinian conflict in Gaza has now passed 500  as large numbers of civilians continue to suffer the punishment meant for Hamas. 

And, aside from a lot of international huff-puffing and the usual unproductive online debates, there are few signs of the conflict slowing . As Israeli Prime Minister Benjamin Netanyahu said Monday , "The operation will continue and be expanded until the goal is achieved - the restoration of quiet to Israel's citizens for a prolonged period."


The United States has been providing direct aid to Israel in a variety of forms since Israel's creation in 1948, more than half of which have been military grants

What's more, the US has given over $30 billion to Israel in military grants since 2000, and it's not just going toward boot polish. In 2010 Israel purchased nearly $3 billion worth of stealth fighter jets  from US defense and aerospace firm Lockheed Martin ( LMT ). While Israel's defense industry is nothing to scoff at, the US has sold other military equipment to Israel as well, much of which in the form of rockets.

Politics aside, it is unlikely that the US will impose sanctions against Israel that would abruptly halt aid, and as this conflict escalates there's an increasing chance of Israeli purchases from American contractors. 

The  other  half of every newspaper's front page is covering the developing investigation of the Malaysian Airlines flight 14 crash last week. Recent reports say that damage patterns in the wreckage indicate that the plane was  likely struck by a fragmenting warhead , and probably one of Russian origin. The apalling attack raises questions about NATO's defensive position, and NATO countries may begin stockpiling arms should a more wide-reaching conflict with Russia present itself.

We screened some of the most likely defense stocks for those with encouraging accounts receivable trends, which measures money that is owed to the company that they haven't received. Encouraging trends suggest that the company has a high transaction turnover rate, which can mean increased profits. The stocks in our list may be poised to help here also, as many already have NATO contracts.

Do you think the conflict in Gaza could boost these defense stocks? Will NATO hedge its bets against Russia? Take a look at the list below and let us know what you think in the comments.

Click on the interactive chart to view data over time. 

1. AeroVironment, Inc. ( AVAV , Earnings , Analysts , Financials ): Designs, develops, produces, and supports unmanned aircraft systems (UAS), and efficient energy systems for various industries and governmental agencies. Market cap at $740.61M, most recent closing price at $33.25.

Revenue grew by 47.% during the most recent quarter ($69.22M vs. $47.09M y/y). Accounts receivable grew by 3.14% during the same time period ($57.1M vs. $55.36M y/y). Receivables, as a percentage of current assets, decreased from 20.75% to 19.73% during the most recent quarter (comparing 3 months ending 2014-01-25 to 3 months ending 2013-01-26). 

Holds exclusive rights to distribute certain unmanned aircraft systems to the US, NATO and other countries.

2. CAE Inc. ( CAE , Earnings , Analysts , Financials ): Designs, manufactures, and supplies simulation equipment and services; and develops integrated training solutions to the military, commercial airlines, business aircraft operators, aircraft manufacturers, and healthcare education and service providers worldwide. Market cap at $3.51B, most recent closing price at $13.72.

Revenue grew by 2.54% during the most recent quarter ($513.6M vs. $500.9M y/y). Accounts receivable grew by -12.89% during the same time period ($439.9M vs. $505M y/y). Receivables, as a percentage of current assets, decreased from 38.92% to 35.41% during the most recent quarter (comparing 3 months ending 2013-12-31 to 3 months ending 2012-12-31). 

CAE just signed a contract with NATO to modernize flight deck simulators and flight training devices.

3. Curtiss-Wright Corp. ( CW , Earnings , Analysts , Financials ): Designs, manufactures, and overhauls precision components and systems. Market cap at $3.09B, most recent closing price at $65.60.

Revenue grew by 18.51% during the most recent quarter ($699.73M vs. $590.45M y/y). Accounts receivable grew by 4.37% during the same time period ($603.59M vs. $578.31M y/y). Receivables, as a percentage of current assets, decreased from 49.19% to 45.14% during the most recent quarter (comparing 3 months ending 2013-12-31 to 3 months ending 2012-12-31). 

Provides electronic upgrades, calibrations and systems for military ground vehicles used by members of NATO.

4. Esterline Technologies Corp. ( ESL , Earnings , Analysts , Financials ): Designs, manufactures, and markets engineered products and systems primarily for the aerospace and defense market, as well as for industrial/commercial and medical markets in the United States and Europe. Market cap at $3.37B, most recent closing price at $107.38.

Revenue grew by 10.27% during the most recent quarter ($504.98M vs. $457.96M y/y). Accounts receivable grew by -1.17% during the same time period ($333.89M vs. $337.85M y/y). Receivables, as a percentage of current assets, decreased from 32.24% to 30.45% during the most recent quarter (comparing 3 months ending 2014-01-31 to 3 months ending 2013-01-25). 

Supplies various models of flare devices to NATO.

(List compiled by Ben Levine. Analyst ratings sourced from Zacks Investment Research. NATO contract data sourced from AeroVironment, Defense-Aerospace, Curtiss-Wright and Valley Associates.  All other data sourced from Finviz.)

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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