Mon, Jan 28, 2008
Seen By Most Analysts As Immune From Economic Downturn
When it comes to making money in the face of a slumping US
economy... the real money is in guns. So say a number of analysts,
who expect the nation's largest defense firms to weather an
expected economic downturn in the year ahead.
"We are about as far removed from the credit risk and those
sorts of matters as you can imagine," Lockheed Martin CFO Bruce L.
Tanner told The Associated Press. "We feel sort of insulated."
Tanner appears to have good reason to feel optimistic. Lockheed
-- builder of, among other products, the F-22 Raptor -- posted a 10
percent increase to its fourth quarter profits in 2007. General
Dynamics posted a 42 percent increase, due largely to its military
products, though the company also noted its Gulfstream unit hasn't
seen any shortfalls yet in private jet orders.
Northrop Grumman earnings remained flat in the quarter, but that
comes off a record year for quarterly revenue and forecasted
growth, according to the AP.
It isn't difficult to see why defense contractors are enjoying
healthy sales, given the ongoing wars in Iraq and Afghanistan. No
matter what pitfalls the consumer index goes through, economists
say defense firms will continue to enjoy government contracts... at
least for the year ahead. The looming presidential election may
mark a change, though, if a new administration calls for troop
cutbacks and other reductions to defense spending.
Still, the industry remains optimistic. "It is a pillar of
stability compared to the turbulent markets in other industries,"
JSA Research analyst Paul Nisbet said of the defense industry.
Lockheed even raised its 2008 earnings outlook, due largely to
improvements in its aeronautics division. Tanner notes cost savings
to its F-35 Joint Strike Fighter program have resulted in a
lower-than-forecast sales drop, as the company shifts from F-16
production to building the new plane.
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