Defense contractors are outperforming expectations as the conflict in Ukraine is driving up profits.
“We’ve gone from 14,000 (artillery) rounds per month to 20,000 very quickly. We’re working ahead of schedule to accelerate that production capacity up to 85,000, even as high as 100,000 rounds per month,” Jason Aiken, General Dynamics’ chief financial officer, said during a call with Wall Street analysts this week.
“And I think the Israel situation is only going to put upward pressure on that demand,” he added.
General Dynamics has benefitted from Pentagon spending that is replacing equipment sent to Ukraine as it battles Russian forces.
Shares of the company rose 4.4 percent after reporting higher-than-expected quarterly profits and a six percent rise to $10.57 billion.
Artillery has “been a big pressure point up to now with Ukraine, one that we’ve been doing everything we can to support our (U.S.) Army customer,” Aiken said.
Northrop Grumman reported quarterly profit of $937 million, which is a two percent increase from last year. The company recorded nearly $9.8 billion in sales for the third quarter of 2023, up from nearly $9 billion during the same period in 2022.
Defense contractor L3Harris Technologies, which specializes in surveillance equipment, microwave weapons, and electronic warfare, beat third-quarter estimates amid rising military spending and the threat of new conflicts.
L3Harris CEO Christopher Kubasik says that the company’s demand remains robust as a heightened threat environment persists.
The company previously anticipated full-year revenue between $18 and $18.3 billion. Now, as the war in Ukraine drags on and the threat of new battlefronts in Israel and the Middle East takes shape, the company projected earnings of up to $19.4 billion this year.
Booz Allen Hamilton, a military contractor specializing in intelligence, cyber and digital solutions, beat Wall Street expectations, posting $2.67 billion in revenue for the second quarter of this year.
The company’s shares climbed 16 percent throughout 2023. The stock rose 18 percent over the past 12 months.
Financially, defense contractors are clearly the biggest winners of war.
A study from Brown University’s Watson Institute for International & Public Affairs found that after the terrorist attacks of Sept. 11, 2001, the Pentagon spent more than $14 trillion with up to $7 trillion going to defense contractors.