The Biden administration has made it clear that it will continue to bump up defence spending in the years ahead. Joe Biden’s $715 billion Department of Defense budget aims to modernize the country’s nuclear arsenal in a bid to deter a rising China. Moreover, an additional $38 billion will be earmarked for defense-related programs which brings the national security total over $750 billion. Investors should take notice.
Lockheed Martin (NYSE:LMT) is a giant in the aerospace and defence space. Its shares have climbed 10% in 2021 as of close on May 28. However, the stock is still down 1.7% from the prior year.
The company released its first quarter 2021 results on April 20. Net sales rose to $16.2 billion – up from $15.6 billion in the prior year. Meanwhile, net earnings were reported at $1.83 billion or $6.56 per share compared to $1.71 billion or $6.08 per share in Q1 2020. Lockheed Martin stock possesses a favourable price-to-earnings ratio of 15 at the time of this writing.
Raytheon Technologies (TSX:RTX) is another beast in the defence sector. Its stock has increased 29% in the year-to-date period. Shares have climbed 38% from the prior year.
In Q1 2021, Raytheon boosted its outlook for the full year. It now projects sales between $63.4 billion and $65.4 billion and adjusted earnings per share between $3.40 and $3.70. Unlike Lockheed, Raytheon is not a value pick at this stage. The company is still clawing back from a difficult 2020.
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