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EUROPE'S DEFENCE BOOM, SOMETHING FOR US CONTRACTORS TOO

The strong outlook for European defence spending isn't just a boon for domestic companies' order books.

Overseas firms, namely U.S. ones, may also stand to gain from the region's largest arms build-up since World War Two.

Canadian bank RBC has looked into it.

Ken Herbert, analyst at RBC, notes Lockheed Martin LMT.N and RTX RTX.N have notable revenue exposures to Europe, at around 11%, while Northrop Grumman NOC.N and General Dynamics GD.N are less exposed at 6.9% and 6.6%.

"Given LMT's significant F-35 backlog and recent country orders as part of the F-35 Global Alliance, we believe LMT could see revenue upside," he says.

"Similarly, missile programs across LMT's Missile Fire and Control segment and RTX's Raytheon segment should position both companies as most likely to see upside".

In RBC's view, the upside for GD's Land Systems portfolio is limited, given NATO countries' likely preference for procuring missile and missile defence systems rather than ground vehicles.

Citi is also upbeat, saying investors are pricing in -1% to +1% growth into most U.S. defence companies indefinitely, a level they believe undershoots likely outcomes over the longer term, given U.S. and European defence spending expectations.

"As such, we think it's time to Buy defense stocks," they say.

(Danilo Masoni)

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EARLIER ON LIVE MARKETS:

PICTET GOES OVERWEIGHT EUROPEAN STOCKS, DOWNGRADES U.S. CLICK HERE

BIG BOUNCE, MDAX STANDS OUT CLICK HERE

EUROPE BEFORE THE BELL: "A REALLY BIG BAZOOKA" CLICK HERE

TARIFFS STAND OUT AMID MENAGERIE OF MARKET DRIVERS CLICK HERE