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5 Defense Stocks to Buy on Upbeat Durable Goods Orders

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Investors who wish to expand their investments in the U.S. defense sector might find it prudent to do so at this point, as demand for defense-related products remained high in October.

Not only are defense programs emerging as top priority for the U.S. government, but also these companies come with a strong foothold in the global defense products and services market, and thus, have solid long-term prospects.

Defense-Related Orders Lead Durable Goods Orders

Orders to American durable goods rebounded in October, owing to a surge in demand for military aircraft. According to the U.S. Census Bureau, orders for durable goods inched up 0.6% in the month, after shedding 1.4% in September. The overall new orders for manufactured durable goods in October rose $1.5 billion to reach $248.7 billion.

To be specific, new orders for military aircraft shot up 18.1%. Shipments of defense aircraft and parts also increased 3.5%. Therefore, it is safe to say that demand for these defense-related products resulted in the uptick in orders for durable goods last month because if one excludes the former, the latter only added 0.1%.

 

More-Than-Expected U.S. Economy Growth in Q3

Coming to economic growth in the United States, GDP growth took place at a faster pace in third-quarter 2019, contrary to economists’ expectations. According to the second estimate released by the Bureau of Economic Analysis, the U.S. economy expanded at a rate of 2.1% during the July-September 2019 period, somewhat faster than initially reported.

This expansion resulted from a surge in private inventory investment, exports and residential fixed investment. To be specific, orders for durable goods increased at a seasonally adjusted annual rate of 8.3% in the third quarter.

Our Choices

We have, therefore, selected five stocks that could gain from third-quarter 2019 growth in the U.S. economy as well as the spike in shipments and new orders of defense-related products. All of these stocks carry a Zacks Rank #2 (Buy), at present, and investors could consider adding these stocks to their portfolio.

Northrop Grumman Corporation (NOC - Free Report) is an operator of aerospace systems, innovation systems, mission systems and technology services segments. The company offers a wide set of systems, products and solutions related to these segments.

The Zacks Consensus Estimate for Northrop Grumman’s current-year earnings has risen 3.8% over the past 60 days. Shares of the company have outperformed the Zacks Aerospace – Defense Industry on a year-to-date basis (+44.1% vs +26.8%). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

L3Harris Technologies, Inc. (LHX - Free Report) is a provider of technology-based solutions that are well-equipped to solve mission-critical challenges of the government and commercial customers. The Zacks Consensus Estimate for L3Harris Technologies’ ongoing-year earnings has moved 6.6% north over the past 60 days. The stock has outperformed the Zacks Aerospace – Defense Industry on a year-to-date basis (+48.9% vs +26.8%).

Leidos Holdings, Inc. (LDOS - Free Report) is a provider of services and solutions in the defense market. The Zacks Consensus Estimate for Leidos’ 2019 earnings has moved up 4.6% over the past 60 days. The company’s shares have outperformed the Zacks Aerospace – Defense Industry on a year-to-date basis (+72.6% vs +26.8%).

Air Industries Group (AIRI - Free Report) is an aerospace and defense company. The company is a designer and manufacturer of structural parts and assemblies related to flight safety. The Zacks Consensus Estimate for Air Industries’ current-year earnings has been revised 63.6% upward over the past 60 days. The stock has outperformed the Zacks Aerospace – Defense Industry on a year-to-date basis (+69.2% vs +26.8%).

Teledyne Technologies Incorporated (TDY - Free Report) is a provider of instrumentation, digital imaging, aerospace and defense electronics, and engineered systems. The Zacks Consensus Estimate for Teledyne Technologies’ 2019 earnings has risen 4.2% over the past 60 days. Shares of the company have outperformed the Zacks Aerospace – Defense Equipment Industry on a year-to-date basis (+67.3% vs +45.2%).

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