In addition to American tanks, M88 technical support vehicles will also be delivered. Earlier, the British announced the transfer of their competitors to Ukraine. Perhaps this will not be the end of the armament of our eastern neighbor. Airplanes may be the next step.
Frank St. John, chief operating officer of Lockheed Martin, America’s largest defense contractor, he told the Financial Timeswhich – that “There is a lot of talk about transferring F-16s to third partiesThe Dutch government has already recognized this Will consider supplying Ukraine with F-16 fightersIf the government in Kyiv requests it.
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The war, which according to Russia’s original assumptions was supposed to last a few days, has dragged on for nearly a year and there is no indication that it will end soon. Further, we can talk about the escalation of activities associated with increasing supplies of equipment. The winners in the whole situation are definitely the world’s largest armaments and defense companies, whose business the war has stimulated.
Russia’s invasion of Ukraine may have entered a phase of a war of attrition with no end in sight. Thus, concerns about the production of weapons equipment can count on additional orders and higher profits – admits Grzegorz Dróżdż, an analyst at Conotoxia, in an interview with Business Insider.
This is best illustrated by the example of the German company Rheinmetall with its registered office in Dusseldorf, which produces, among other things, Tiger tanks. The value of its business, as measured by the market valuation of shares on the Frankfurt Stock Exchange, In one year it increased by 150%, which is about 6 billion euros. It currently amounts to 10 billion euros.
General Dynamics and their Abrams
Less exciting are the shares of American General Dynamics, which produces ia Abrams tanks.
Despite the signing of a contract worth $127.7 billion, shares of the Abrams tank maker have risen 3.8 percent since the start of the war. – Notes by Grzegorz Dróżdż. On an annual basis, we’re talking about 12 percent. growth.
However, if we consider the increase in the turnover of the business in the United States, then it is nominally similar to that of Rheinmetall, because the turnover of General Dynamics is many times larger. The company’s value increased by more than $6 billion a year. to more than $62 billion.
– General Dynamics’ share price is up 12% for the year, but it’s not benefiting from the good sentiment in the broad market this year, – commented Daniel Kosteki, CMC Markets analyst.
In an interview with Business Insider, he points out that The company’s revenue for the past 12 months rose to $38.85 billion. From 37.98 billion in 2020. The average forecast of analysts indicates that in the next 12 months the company will generate revenues of approximately 42 billion US dollars.
– Representatives of General Dynamics indicated in their report for the last quarter that war and tanks are not the most important thing for it. Gulfstream business jets are the key to results right nowFor which there has been strong demand in the past three months,” Kostecki confirms. He suggests that business people may want to be able to move quickly in case the conflict spills over.
Lockheed Martin and their F-16
It is also worth paying attention to Lockheed Martin, which produces the F-16. One of the members of the “big five” of the US defense industry, including thanks to the current situation in the world, has grown by 16 percent per year. The market valuation of the business jumped more than $16 billion over that period. And it already reaches 119 billion US dollars.
There is talk that individual countries could re-export their F-16 fighters. same Lockheed even plans to ramp up production to supplement deliveries to countries that may choose to donate its equipment – notes Daniel Kosteki.
He notes that the company’s price has increased by about 20% during the year, and has lost 6.65% since the beginning of this year. That counts Its revenue increased in the most recent quarter (for a 12-month period) to $65.98 billion. However, forecasts do not assume that it will increase particularly this year.
The defense industry has earned nearly $100 billion.
Rheinmetall, General Dynamics and Lockheed Martin were particularly loud this week, but there are many other companies in the defense industry that are widely understood.
Grzegorz Dróżdż draws attention, for example, to the shares of the French industrial company Safran, which produces, among other things, the Rafale, Eurofighter and F-35 aircraft. Its stock market has jumped more than 20 percent since the start of the war.
Our list of leading players from Europe and the United States includes a total of 14 issues. Everyone’s business is worth more than it was in the same period last year (just before the war broke out). Altogether, the market values it at US$96 billion. higher.
Nominally, those already mentioned are the most profitable Lockheed Martin and Raytheon Technologies (known in Poland mainly from the implementation of the Patriot groups contract for our country) – About $16 billion each. More than $11 billion. Boeing and Northrop Grumman gained value.
In percentage terms, the largest jump was recorded by small producers, mostly from outside the United States. By 50 percent the value of the Italian Leonardo and the French Thales increased in a year. More than 40 percent also rose in prices for BAE Systems, which is based in Great Britain.
Will the arms industry make money for stock investors?
For defense companies, war creates a huge market, however It’s not such an obvious business that it’s easy to make money on it From the site of a player on the stock exchange for exampleI am looking for easy opportunities.
Stock charts of the largest manufacturers of weapons and military equipment do not show a clear trend. After the price boom in February and March 2022, there were periods when stocks clearly reversed previous gains.
A prolonged armed conflict may translate into further requests for military equipment and potential profits for the companies that produce it. However, investing in stocks of these companies can be very risky – warns Grzegorz Dróżdż.
The Conotoxia analyst points out that it is difficult to predict how long the fights will last, and their end can be assessed in the value of defense stocks.
– Looking broadly at the ETA ETF (iShares US Aerospace & Defense ETF), we can see that the unit price is quite stable, but Wasn’t even able to get over the top pre covid. At the time, the price was $120, today it is just over $112. – Comments by Daniel Kostecki of CMC Markets.
The expert admits, however, that investors can actually count on higher rates of return because In 2018, the cumulative flow of funds into this ETF annually amounted to more than 2.3 billion USD.
He warns that “investors are still hoping for a rally in stock prices, but the Wall Street consensus is not pointing to very quick gains in this sector going forward.” And he emphasizes that this is not the gaming industry or information technology.
– Here, the business is not scalable, and the costs to be incurred in the production process are huge. It also takes time. After all, we are talking about heavy military equipment and technologically advanced devices, ”Kostecki emphasizes.
author: Damien Somsky is a journalist for Business Insider Polska
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