By John Foley for Kapitall.
On Wednesday, President Barack Obama made headlines with his graduation speech at the United States Military Academy at West Point. Obama's speech comes at a particularly prescient moment for US foreign policy, arriving on the heels of the administration's announcement of a slower-than-expected Afghanistan drawdown now projected to conclude in 2016.
According to the proposed plan, US military presence in Afghanistan would be reduced from its current number of approximately 33,000 to 10,000 in 2015 and then to "virtually none" by the following year.
As the President announces a slow but steady withdrawal of forces in Afghanistan (projected to eventually reach "normal embassy levels" by 2016), many financial analysts are beginning to look past the immediate political consequences of the 13-year war and are now questioning what this reduction will mean for the American defense contracting industry.
So, what exactly does the drawdown mean for some of America's largest defense contractors, such as Boeing ( BA ) , Lockheed Martin ( LMT ) and the Northrop Grumman Corporation ( NOC ) ?
Luckily for them, evidence points to not much changing. According to the New York Times , Boeing saw its net operating earnings for 2013 rise 12% , while Lockheed Martin actually raised its earnings forecast for 2014 after profits soared 16%. This growth, stemming from the manufacture of military planes and other resources, makes analysts regard the near term financial future of these contracting titans as relatively secure.
Do you think the big military contractors will benefit from the extended time frame for withdrawal? Use the list below to begin your analysis and let us know what you think in the comments.
Click on the interactive chart to view data over time.
1. Boeing Co. ( BA , Earnings , Analysts , Financials ): Engages in the design, development, manufacture, sale, and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide. Market cap at $98.34B, most recent closing price at $134.33.
2. Lockheed Martin Corporation ( LMT , Earnings , Analysts , Financials ): Engages in the research, design, development, manufacture, integration, operation, and sustainment of advanced technology systems and products in the areas of defense, space, intelligence, homeland security, and government information technology in the United States and internationally. Market cap at $51.06B, most recent closing price at $160.77.
3. Northrop Grumman Corporation ( NOC , Earnings , Analysts , Financials ): Provides products, services, and solutions in aerospace, electronics, information systems, shipbuilding, and technical service sectors. Market cap at $25.63B, most recent closing price at $119.57.
(List compiled by John Foley. Monthly returns sourced from Zacks Investment Research, all other data sourced from Finviz.)
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.