Last week the United States Senate Democrats blocked Republican plans to advance an appropriations package that included a $693 billion fiscal 2020 defence spending package. Later that week lawmakers sought to extend government spending through November to avoid a potential shutdown. Still, investors should expect a continued uptick in spending into the next calendar year.
Lockheed Martin (NYSE:LMT) stock has climbed 52% in 2019 as of mid-afternoon trading on September 27. The mammoth defence contractor recently approved a $1-billion share buyback program. This bumps up the total remaining authorization for share buybacks to a whopping $3.3 billion. Lockheed also hiked its quarterly dividend by $0.20 to $2.40 per share, representing a 2.3% yield.
Shares of Lockheed possess a price-to-earnings ratio below 20 but a high price-to-book value of 38.9 at the time of this writing. I like Lockheed ahead of the New Year, but I’m waiting for a more favourable entry point before jumping on the stock.
United Technologies (NYSE:UTX) stock has risen 31% in 2019 so far. The merger with Raytheon is yet to be finalized, and a target has been set for early June 2020. It would become the second-largest defence contractor behind Boeing.
United Technologies boasts a P/E ratio of 22.6 and a P/B of 2.9. There is likely little upside ahead of the merger. Investors should keep their eyes on United ahead of 2020, and jump on any potential buy-low opportunities.
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