Per major media sources, Raytheon Company (RTN - Free Report) has clinched a contract worth $39.2 million from the U.S. State Department for the sale of additional Javelin anti-tank weapons to Ukraine. Specifically, the agreement includes sale of 150 anti-tank missiles and two additional missile launchers.
With Ukraine and Russia on loggerheads for long, analysts are skeptical that this might enrage the latter, which, in turn, may retaliate against the United States. This should keep investors optimistic about defense stocks’ growth.
Prospects of US Defense Stocks
A consistent fight between Moscow-backed separatists and Ukraine’s pro-Western government has pitted Russia and Ukraine against each other over the past few years. Particularly, Ukraine has been bolstering its combat capabilities since Russia annexed Crimea in 2014 and backed forces in eastern Ukraine. The defense-friendly Trump administration has extended military aid to Ukraine. Notably, the U.S. government in 2017 approved lethal arms sales to Ukraine, something that the Obama administration had never done. In 2018, the United States sold over 200 missiles and 37 launchers package, worth $47 million to Ukraine.
With Javelin being the U.S. Army and Marine Corps’ premier anti-tank weapon, the latest buy will allow Ukraine to keep Russia at bay and build its long-term defense capacity to defend its sovereignty and territorial integrity.
Moreover, in May 2018, the Congress approved military assistance worth $250 million to Ukraine in 2019, including lethal weaponry. But this sale deed has not yet seen the light of day as President Trump asked his national security team to review the funding program to ensure the money is being used in the best interest of the United States, as stated by a U.S. official to Politico.
Notably, Ukraine’s president declared in September that the United States will extend a $140 million worth military aid, in addition to the $250 million aid approved by the Congress. However, there has been no confirmation from any U.S. official regarding this claim by Ukraine’s president.
Considering the aforementioned developments, if these military aids are actually extended, U.S. defense contractors would benefit immensely. Although there is no confirmation of that happening anytime soon, the latest sale of Javelin seems to have again opened the doors for weapon sales from the United States to Ukraine.
Stocks in Focus
The recent development should bolster investors’ confidence in the following U.S. missile makers, including Raytheon, as the adoption of missiles is more common in cross-border clashes.
The Boeing Company (BA - Free Report) : This renowned jet maker also manufactures missile defense systems like Ground-Based Midcourse Defense and a family of Laser & Electro-Optical Systems. It also produces Missile Seeker for PAC-3 missiles.
Raytheon Company: It is a prominent missile maker in the United States. It manufactures notable missiles like Patriot, ESSM, the AMRAAM air-to-air missile and many more.
Lockheed Martin Corp (LMT - Free Report) : This military jet maker manufactures some of the prominent missile defense systems of the United States like THAAD missile, PAC-3 MSE, Aegis Combat System, MEADS and a few more.
Northrop Grumman Corp (NOC - Free Report) : Key programs of this global security provider include U.S. Navy’s Advanced Anti-Radiation Guided Missile (AARGM). It also leads a joint project that produces and maintains Minuteman III nuclear intercontinental ballistic missiles for the United States.
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