Lockheed Martin Corporation (LMT), Northrop Grumman Corporation (NOC), Raytheon Company (RTN): Is It Time to Bet on Defense?

Whatever it takes

Raytheon Company (NYSE:RTN) has also seen revenue decline over the past two years, but it’s not going to let industry trends stand in its way. If it won’t grow organically, then it will grow inorganically through acquisitions. Its latest purchase was Visual Analytics, a data analytics company. This fits Raytheon well, as it focuses on battlefield strategy via information and analysis.

That said, perhaps Raytheon Company (NYSE:RTN) doesn’t need any help. It recently beat earnings and upped its full-year guidance. For this year, revenue is now expected to come in at $23.5 billion to $23.7 billion versus a prior expectation of $23.2 billion to $23.5 billion. Adjusted EPS is expected to come in at $6.00 to $6.10 versus a prior expectation of $5.75 to $5.90.

Raytheon Company (NYSE:RTN) consistently buys back shares, it currently yields 3.10%, and it has been a consistent performer through the years. But its all-time stock performance doesn’t come close to that of Lockheed Martin Corporation (NYSE:LMT) or Northrop Grumman Corporation (NYSE:NOC). Perhaps that will change.

Conclusion

Lockheed Martin and Northrop Grumman have been neck-and-neck for decades when it comes to stock appreciation. And both companies offer generous dividends. At the moment, Lockheed Martin yields 3.80%, and Northrop Grumman Corporation (NYSE:NOC) yields 2.70%. However, Lockheed Martin is highly leveraged, whereas Northrop Grumman sports a healthy debt-to-equity ratio of 0.54. Therefore, Northrop Grumman is likely to better weather an economic storm.

While nobody can predict the future, the most likely scenario is that all three stocks continue to rise. However, this is an industry just like any other, and when nearly $1 trillion is pulled out of that industry, it’s going to hurt. The good news is that if any of these stocks get slammed, they’re resilient and important enough that it should present an excellent buying opportunity.

The article Is It Time to Bet on Defense? originally appeared on Fool.com and is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin, Northrop Grumman, and Raytheon Company. Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.