US Offers a $2.1B Package to Ukraine: 3 Defense Stocks to Gain
The U.S. administration recently declared a new security package, which includes critical air defense and ammunition capabilities, worth $2.1 billion for Ukraine. Prior to this, in May 2023, the United States offered a $1.2 billion aid to Ukraine in a bid to support the nation’s air defense as well as artillery ammunition needs.
The latest commitment made by President Biden takes the total security assistance provided by America to Ukraine to $39.7 billion since February 2022, following Russia’s Ukrainian invasion. Such security packages have once more put the spotlight on U.S. defense majors like Raytheon Technologies Corp. RTX, BAE Systems Plc BAESY and AeroVironment AVAV, which are expected to gain in the near term.
Details of the Package
The latest aid package is yet another commitment by the U.S. administration under the Ukraine Security Assistance Initiative (USAI). It is aimed to provide Ukrainian Armed Forces with critical combat capabilities, including defense products as well as associated training and sustainment activities.
The $2.1 billion package pledges to supply laser-guided rocket system munitions as well as additional munitions for Patriot air defense systems to Ukraine. This aid also includes delivering HAWK air defense systems and missiles, 105mm and 203mm artillery rounds and Puma Unmanned Aerial Systems.
Defense Stocks to Gain
Considering the aforementioned discussion, it is quite obvious that U.S. defense contractors, particularly those manufacturing defense products pledged by America to Ukraine as part of the latest aid package, will gain substantially in the coming days. Also, their inherent growth prospects keep them on a prudent investor’s watchlist.
Raytheon: It is a renowned radar and missile maker in the United States. The company’s MIM-23 Hawk is an all-weather low to medium-altitude ground-to-air missile system. Raytheon is also the manufacturer of Patriot air defense systems, the only combat-proven ground-based air defense capability available in the world to defeat advanced long-range cruise missiles, tactical ballistic missiles, and a full spectrum of air-breathing threats.
The company boasts a long-term earnings growth rate of 8.3%. The Zacks Consensus Estimate for RTX’s 2023 sales implies an improvement of 8.3% from the 2022 reported sales figure. It carries a Zacks Rank #3 (Hold).
BAE Systems: It manufactures a wide range of electronic systems and subsystems for both military and commercial applications, apart from providing service support for armored combat vehicles, artillery systems and intelligent munitions. BAE Systems’ L31 High Explosive 105mm shell achieves a higher consistency of range and accuracy compared to the US M1 shell and has a 25% greater lethal area.
The company boasts a long-term earnings growth rate of 13.7%. The Zacks Consensus Estimate for BAESY’s 2023 sales implies an improvement of 24.8% from the 2022 reported sales figure. It holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AeroVironment: It manufactures UAS and tactical missile systems that provide situational awareness, multi-band communications, force protection and other mission effects. AVAV’s PUMA LE is an all-environment ultra-lightweight aircraft that can provide up to 6.5 hours of flight endurance. This UAS provides an operational range of 60 km in land and maritime environments when used with AVAV’s Long-Range Tracking Antenna.
The Zacks Consensus Estimate for AVAV’s fiscal 2023 earnings indicates an improvement of 1.6% from the fiscal 2022 reported earnings figure. The Zacks Consensus Estimate for AVAV’s 2023 sales implies an improvement of 17.4% from the 2022 reported sales figure. It has a Zacks Rank #3.
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