Lockheed Martin Corporation (LMT), Raytheon Company (RTN) & General Dynamics Corporation (GD): The Effects of Budget Cuts on Defense Companies

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General Dynamics Corporation (NYSE:GD) has a global presence and a vast product portfolio including combat vehicles; weapons systems and munitions; shipbuilding design; and repair and construction and information systems. The company posted flat earnings for the first quarter of 2013, totaling $571 million compared to the first quarter of 2012. Also, it could not improve its operating margins that stood at 11.4%. The management gave guidance about the sequestration indicating it wouldn’t significantly affect their 2013 results. In line with other defense stocks, General Dynamics Corporation (NYSE:GD) announced a regular dividend of $0.56 per share, and its stock price has gained more than 15% over the last six months.

Bottom Line

Lately, the big US defense contractors have diversified risks of budget cuts by expanding their product base and including some other services than the traditional security technology. This has been the case for Raytheon Company (NYSE:RTN), which acquired Teligy in 2012: a cyber-security firm specialized in wireless communications and vulnerability analysis. On the other hand, General Dynamics Corporation (NYSE:GD) acquired Vangent, an IT healthcare firm to further develop its information technology business. Nowadays, defense companies have grown into huge companies that sell a different range of products and services not only for the US military but for the civilian market as well. This gives a hint why most of the peer group analyzed in this article was not affected heavily by the sequestration program and did not even reflect minor setbacks in their stock prices.

The article The Effects of Budget Cuts on Defense Companies originally appeared on Fool.com.

Vanina Egea has no position in any stocks mentioned. The Motley Fool owns shares of General Dynamics Corporation (NYSE:GD), Lockheed Martin Corporation (NYSE:LMT), and Raytheon Company (NYSE:RTN). Vanina is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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