Soaring Global Arms Demand Drives Profits in Military-Industrial Sector
U.S. defense contractor Northrop Grumman Corp. on Thursday forecast full-year sales rising past Wall Street estimates as it leads a host of manufacturers benefiting from rising global demand for military weaponry.
Reuters reports the U.S. and its allies have been buying more arms and ammunitions and supporting Ukraine with billions of dollar in military aid after Russia invaded the country last year.
During the quarter, Northrop debuted its new B-21 “Raider” jet, the first of a new fleet of long-range stealth nuclear bombers for the U.S. Air Force, as Breitbart News reported.
“We’re raising our sales outlook for 2023 and expect to deliver strong multi-year cash flow growth,” Northrop Grumman Chief Executive Kathy Warden said.
The Falls Church, Virginia-based company expects 2023 sales between $38 billion and $38.4 billion, ahead of the average analyst estimate of $37.86 billion, and an adjusted profit of $21.85 to $22.45 per share, compared with estimates of $22.30, according to Refinitiv IBES data cited by Reuters.
Northrop Grumman Corp is not alone in gaining from global conflict.
According to data released by the State Department on Wednesday, weapon manufacturers in the U.S. profited handsomely in 2022 due to the massive amount of arms sales to other countries – especially Ukraine.
As a result of the war in Ukraine and a rise of tensions between the U.S. and China over Taiwan, arms sales skyrocketed from $35.8 billion in 2021 to $51.9 billion in 2022, and an even larger profit was seen due to direct weapon sales from U.S. manufacturers, going from $103.4 billion in 2021 to $153.7 billion that same year.
The biggest clients include Germany, which has ordered 35 F-35 Joint Strike Fighter airplanes for $8.4 billion, and Poland, which spent $6 billion on 250 M1 Abrams tanks. Others include Spain, the UK and Bulgaria who recently joined NATO.
General Dynamics, which makes Abrams tanks and Stryker vehicles, meanwhile reported revenue of $2.18bn in its combat systems business in the fourth quarter of 2022, up 15.5 percent from the same period in 2021, with operating earnings rising over 18 per cent to $332mn.
The Financial Times (FT) reports the second half of 2022 brought increased interest in the group’s vehicles as governments, particularly in the west, committed to increasing defence spending in light of Russia’s invasion of Ukraine.
In the fourth quarter, the U.S. army awarded General Dynamics a $180mn contract to upgrade Abrams main battle tanks and $100mn for Stryker M-Shorad vehicles. Austria also spent $20mn on upgrades to tracked vehicles, and Luxembourg ordered $75mn worth of combat vehicles.
General Dynamics also received $260mn in munitions orders, some of which could end up in Ukraine, the FT pointed out.