Executive Briefings

Air, Missile Strikes in Iraq, Syria Revive Flagging Fortunes of U.S. Defense Contractors

Three days after U.S. warships fired 47 cruise missiles at Sunni militant targets in northern Syria, the Pentagon signed a $251m deal to buy more Tomahawks from Raytheon Co., a windfall for the military giant and its many subcontractors.

As U.S. combat operations ended in Iraq and Afghanistan, the defense industry braced for protracted budget cuts at the Pentagon. Major contractors have laid off workers, merged with one another and slowed production lines as spending shrank and leaner times loomed ahead.

But with U.S. and allied aircraft now bombing Islamic State and Al Qaeda positions in Iraq and Syria, many analysts foresee a boost to bottom lines for munitions manufacturers, weapons producers and other military contractors.

Wall Street is paying attention. Shares of major military contractors — Raytheon, Lockheed Martin Corp., Northrop Grumman Corp. and General Dynamics Corp. — all have been trading near all-time highs, outpacing the Standard & Poor's 500 index of large companies' stocks.

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As U.S. combat operations ended in Iraq and Afghanistan, the defense industry braced for protracted budget cuts at the Pentagon. Major contractors have laid off workers, merged with one another and slowed production lines as spending shrank and leaner times loomed ahead.

But with U.S. and allied aircraft now bombing Islamic State and Al Qaeda positions in Iraq and Syria, many analysts foresee a boost to bottom lines for munitions manufacturers, weapons producers and other military contractors.

Wall Street is paying attention. Shares of major military contractors — Raytheon, Lockheed Martin Corp., Northrop Grumman Corp. and General Dynamics Corp. — all have been trading near all-time highs, outpacing the Standard & Poor's 500 index of large companies' stocks.

Read Full Article