Lockheed Poised to Benefit as EU Approves Ukraine’s Purchase of Patriot Missiles
Lockheed Martin has been benefiting from missile demand as Western countries look to refill their missile stockpiles and build their arsenals.
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Winter is coming, bringing cooler temperatures but no reprieve for geopolitical hot zones. It’s a good time to be the world’s largest defense contractor.
On Tuesday, European Commission President Ursula von der Leyen announced that EU member states had approved the use of 3.2 billion euros (roughly $3.7 billion) of its 90 billion-euro Ukraine Support Loan to buy Patriot interceptor missiles. The news comes amid depletion of Ukraine’s air defenses while Russia is expected to ramp up attacks as the cold season approaches.
Lockheed Martin stands to benefit from the EU’s agreement: It manufactures the Patriot’s PAC-3 MSE interceptor missiles.
Rallying on Replenishments
Lockheed Martin has been boosted by broad missile demand as Western countries look to refill their missile stockpiles and build their arsenals. Just this week, Swedish Defense Minister Pal Jonson said Sweden was buying its HIMARS artillery rocket system in a deal worth roughly $728.8 million.
But the company has been racking up sales closer to home, too. In late July, the US government awarded Lockheed Martin a seven-year contract for up to $53.86 billion for its missile interceptors, which brought its total multi–year contract value to $58.62 billion. The money will allow Lockheed Martin to triple capacity by the end of the decade, the company said. The US has been working on replenishing its weaponry stockpiles, which were considered insufficient even before the war with Iran (despite the president saying last week that the country has “virtually unlimited amounts” of ammunition).
Wall Street seems to think Lockheed Martin’s success isn’t just a short-term surge in defense spending:
- UBS just upgraded the company’s stock to buy from neutral and raised its 12-month price target to $674 from $581. The stock ticked up 2% for the day and has gained roughly 8% this year.
- In the second quarter, Lockheed’s sales jumped 11% year over year to $20 billion, and the company hiked its full-year revenue forecast to as much as $81.75 billion.
Other Winners: Despite the world being rife with conflict, Investor’s Business Daily recently reported that its aerospace/defense industry group tracker has notched fewer gains than might be expected. (There’s often a lag between when companies win orders and those orders being reflected in a stock price.) But there have been some standouts. SIFCO Industries, which makes forgings and machined components, has surged 272% this year. Aerospace and defense company Astronics is up 62%, and Ducommun, an engineering company, is up 74%.
