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3 Defense Picks If Russia Intervenes in U.S.-Syria Crisis

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The United States along with its French and UK allies launched a series of airstrikes on Syria over the last weekend. 105 missiles were fired on three facilities involved in research or storage of chemical weapons in western Syria. 

On Apr 7, Duma was a witness to a chemical attack which claimed several lives. The recent attack is believed to be a response to the same. The world once again witnessed fresh tension following which U.S. defense stocks gained substantially as majority of the weapons used in the strike were provided by them.

Russia’s Stance

Russia strongly condemned the latest U.S.-led airstrikes and repudiated America’s claim that Russian president Vladimir Putin supported Syrian leader Assad in the chemical attack. Russia’s ambassador to the United States warned that the country will handle the issue with firm hands and the defamation of the Russian president will be dealt with.

Criticizing the latest attack as an "act of aggression", Putin warned that further strikes from Western countries on Syria will have implications on global affairs.

Will Russia Strike Back?

Though Russia strongly condemned the Syrian attack, majority of experts believe that Russia will not engage in any direct conflict with the United States, at least in the near term.  Per a report by CNBC one analyst said "likelihood of a direct, military response to the strikes from Russia is very low."

Despite the Russian ambassador’s repeated threats of the nation targeting and destroying the platforms from which the missiles were fired, Moscow is fully aware that such attacks will bring Russia in a direct face-to-face conflict with the United States. Thus a Russian retaliation is unlikely in the near term.

Economic Sanctions to Play a Role?

Recently rounds were made that the United States intends to levy new economic sanctions on Russia for its apparent support of the Syrian leader Assad.  In particular, U.S. Ambassador to the United Nations Nikki Haley announced on Apr 15 that the United States will put new economic sanctions on companies "dealing with equipment" used in Assad’s alleged chemical attack.

However, President Trump, in a recent meet, dismissed possibilities of imposing new sanctions on Russia in the near term. Should the move come, it will further strain the relationship between these two nations. Notably, relations between the United States and Russia have failed to remain genial after the Trump administration imposed sanctions on several Russian tycoons close to Putin, earlier this month, due to their involvement in the 2016 election.

In the near future, it is expected that by imposing stringent economic sanctions Trump will try to keep Russia under pressure and also ensure that the nation abstains from involving in its Syrian affairs.

Defense Stocks to Gain From the Conflict: Here’s Why

Historical data shows that shares of U.S. defense majors have spiked whenever the United States has engaged in military activities. Of the 105 missiles fired at Syria, 19 were JASSMs manufactured by Lockheed Martin Corporation (LMT - Free Report) and 66 were Tomahawk cruise missiles made by Raytheon Company (RTN - Free Report) . Evidently, their shares gained more than 0.5% in the past couple of trading sessions. 

Stocks to Place Bet On

If Russia ultimately decides to retaliate, the fresh conflict will provide a solid boost to U.S. defense stocks. Therefore, adding defense stocks with a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) and strong financials to your portfolio will be a prudent move.

The Boeing Company (BA - Free Report) is the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries, and one of the largest aerospace and defense contractors. Apart from manufacturing top-rated commercial and military aircraft, it also offers strategic missile and defense systems as well as command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR).

The company delivered an average positive earnings surprise of 20.69% in the trailing four quarters. The Zacks Consensus Estimate for its 2018 earnings improved 3.9% over the last 60 days. It has a long-term earnings growth rate of 13.8%.The company currently carries a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

Raytheon is a defense major with a diversified portfolio of military products which includes missiles, radars, sensors, surveillance and reconnaissance equipment, communication and information systems, naval systems, air traffic control systems, and technical services.

Notably, the company topped the Zacks Consensus Estimate in the trailing four quarters with an average beat of 6.36%. It boasts a solid long-term earnings growth rate of 10.9% and its Zacks Consensus Estimate for 2018 earnings has improved 0.5% in last 60 days.

The company carries a Zacks Rank #2.

Northrop Grumman (NOC - Free Report) supplies a broad array of products and services to the U.S. Department of Defense, including electronic systems, information technology, aircraft, space technology and systems integration services. It also offers integration and interoperability of air and missile defense systems.

Notably, the company topped the Zacks Consensus Estimate in the trailing four quarters with an average beat of 16.17%. It boasts a solid long-term earnings growth rate of 9.10% and its Zacks Consensus Estimate for 2018 earnings has improved 1% in the last 60 days.

The company carries a Zacks Rank #2.

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