The Pentagon’s call for more weapons has a way of pushing the current DoD budget projections to the side and elevating the need to support the war in Ukraine. On May 6, the DoD announced the Presidential Drawdown of security assistance valued at up to an additional $150 million. This authorization is the ninth drawdown of equipment from DoD inventories for Ukraine since August 2021. The U.S. has now committed approximately $4.5 billion in security assistance to Ukraine since the beginning of the Biden Administration, including approximately $3.8 billion since the beginning of Russia’s unprovoked invasion on February 24.
And yesterday, the President signed into law the “Ukraine Democracy Defense Lend-Lease Act of 2022.”
The act authorizes the administration, through fiscal year 2023, to lend or lease military equipment to Ukraine and other Eastern European countries. The act would exempt the administration from certain provisions of law that govern the loan or lease of military equipment to foreign countries, such as the five-year limit on the duration of the loan or the requirement that receiving countries pay all costs incurred by the United States in leasing the defense equipment.
Defense Stocks to Watch in May 2022
Between ongoing contracts, replenishing stockpiles, and actively supporting Ukraine, the defense industry’s financial outlook wound up getting a cash infusion – or a promise of some in the future as defense industry leaders speak with the Pentagon officials on supporting their efforts. The war in Ukraine is also helping to shape the defense industry decisions for future potential conflicts. What has worked for Russia, as well as, what has not, plays a role in future investments. As more drones are requested or other stockpile items, the defense industry wheel starts to spin a little bit faster to support the needs.
Currently, the average S&P 500 YTD return is 16.79%, and the average Nasdaq YTD return is 26.59%.
1. Lockheed Martin (LMT)
- Current Price: $438.84
- Trailing P/E: 19.38
- Market Cap: 119.6B
- YTD return: 23.47%
- Analyst Recommendation: Overweight
- Average Target Price: $485.89
2. Raytheon (RTX)
- Current Price: $91.75
- Trailing P/E: 32.91
- Market Cap: 141.73B
- YTD return: 6.61%
- Analyst Recommendation: Overweight
- Average Target Price: $114.78
3. Honeywell (HON)
- Current Price: $193.96
- Trailing P/E: 25.77
- Market Cap: 133.96B
- YTD return: -6.98%
- Analyst Recommendation: Overweight
- Average Target Price: $222.06
4. Leidos (LDOS)
- Current Price: $99.38
- Trailing P/E: 19.52
- Market Cap: 14.07B
- YTD return: 11.79%
- Analyst Recommendation: Overweight
- Average Target Price: $117.25
5. KBR Inc (KBR)
- Current Price: $44.88
- Trailing P/E: N/A
- Market Cap: 6.48B
- YTD return: -5.75%
- Analyst Recommendation: Buy
- Average Target Price: $114.78
6. Amazon (AMZN)
- Current Price: $2,175.78
- Trailing P/E: 52.47
- Market Cap: 1.17T
- YTD return: -34.75%
- Analyst Recommendation: Buy
- Average Target Price: $3,666.72
7. Boeing (BA)
- Current Price: $133.31
- Trailing P/E: N/A
- Market Cap: 88.09B
- YTD return: -33.78%
- Analyst Recommendation: Overweight
- Average Target Price: $227.50
8. Aerovironment (AVAV)
- Current Price: $75.77
- Trailing P/E: N/A
- Market Cap: 2.02B
- YTD return: 22.15%
- Analyst Recommendation: Hold
- Average Target Price: $86.50
9. Northrop Grumman (NOC)
- Current Price: $543.98
- Trailing P/E: 12.56
- Market Cap: 72.86B
- YTD return: 17.29%
- Analyst Recommendation: Overweight
- Average Target Price: $480.25
10. Elbit Systems (ESLT)
- Current Price: $196.19
- Trailing P/E: 31.65
- Market Cap: 9.11B
- YTD return: 12.67%
- Analyst Recommendation: Overweight
- Average Target Price: $236.00
Terms to Understand
Trailing P/E: A ratio for valuing a company; calculated by dividing the current share price by total earning per share over the past 12 months. N/A means the P/E is negative.
Market Cap: Market Cap is the total market value of a company’s outstanding shares. Calculated by multiplying the total shares by the current market price of one share.
Analyst Recommendation: Consensus Analysts Recommendation is taken from MarketWatch’s five recommendations: Sell, Underweight, Hold, Overweight, and Buy, with Sell being the worst and Buy being the best. While Overweight seems like a bad thing in life, analysts are saying that it could perform better in the next 12 months compared to the benchmark. The key is understanding the analyst’s benchmark that they are using.
Average Target Price: Average Target Price is taken from MarketWatch
*Numbers are as of May 9 2022, close of market.
*This article is intended to be informational only; it is not financial advice.
