No matter what time period in history you look at, there is almost always some sort of global conflict. While nobody wants to see protracted and deadly wars, the reality is that most major countries have adopted a peace through strength posture. For investors looking for sectors to shift to as the aging bull market slows down, it always makes sense to have positions in the defense and aerospace arena.
In a new research report from the defense and aerospace team at Baird, they make a solid case that the sector could continue to outperform the rest of 2019 and into next year. The analysts previewed seventeen top companies, so we screened the research looking for the large capitalization leaders that were rated Outperform, and found five industry leaders that look like solid picks for long-term growth investors.
This company has had a public relations nightmare due to the 737 MAX issues. Boeing Co. (NYSE: BA) is the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined. It is also one of the most valuable brands in the world.
The different segments in the company are Commercial Airplanes, Boeing Defense, Space & Security and Boeing Capital. The latter provides financial solutions facilitating sale and delivery of Boeing commercial and military aircraft, satellites and launch vehicles.
Last year, Boeing and Embraer signed a nonbinding memorandum of understanding to create a new strategic partnership for commercial aviation. The new joint venture is valued at $4.75 billion, which values Boeing’s 80% share at $3.8 billion.
While the 737 MAX troubles are far from over, the tide is finally turning for the company, and the firm was basically upbeat at the recent Paris Air Show. The 737 MAX software update is complete and the company is working on training and education materials and certification processes now. Once it returns to flight, deliveries may be higher than the production rate, and long-term expectations on production have not changed.
Boeing shareholders receive a 2.33% dividend. The Baird price objective is a whopping $470, and the Wall Street consensus target price is $415.09. The stock closed trading on Wednesday at $352.30.
This company, like other major defense prime contractors, has had a very solid year. General Dynamics Corp. (NYSE: GD) is engaged in business aviation, land and expeditionary combat vehicles and systems, armaments, munitions, shipbuilding and marine systems, and information systems and technologies.
Major products include Virginia-class nuclear-powered submarine and Ohio class replacement, Arleigh Burke-class Aegis, Abrams M1A2 tank, Stryker eight-wheeled assault vehicle, medium-caliber munitions and gun systems, tactical and strategic mission systems.
Investors in General Dynamics receive a 2.26% dividend. Baird has a $218 price target for the shares, recently raised from $188, while the consensus target is $201.63. The stock closed at $182.54 a share on Wednesday.