Why Lockheed Martin, RTX stand to outperform in 'foreseeable future'

Defense contractor stocks are drawing attention as Lockheed Martin (LMT) and RTX (RTX) face market pressure on Tuesday. The sector presents a mixed earnings picture, with Lockheed Martin falling short of third quarter revenue estimates while RTX beat expectations and raised its full-year outlook.

Gabelli Funds Aerospace and Defense ETF (GCAD) portfolio manager Tony Bancroft joins Catalysts to share his perspective on the sector's outlook.

Despite current market pressure, Bancroft remains optimistic about these companies' long-term prospects, citing robust secular tailwinds. He emphasizes that the defense business is set to maintain substantial backlogs for the "foreseeable future."

To watch more expert insights and analysis on the latest market action, check out more Catalysts here.

This post was written by Angel Smith

Video Transcript

Switching gears a little bit.

I want to talk about a bit of a mixed picture that we are getting here.

We had Lockheed Martin results.

We also have RT X. Lockheed missing on quarterly revenue estimates only for the second time in the last couple of years here.

But RT X raising its 2024 forecast and having it better than expected results still see both companies under pressure Lockheed.

Certainly more so.

But what do you make of the kind of mixed picture between those two names?

You know, again, I think big picture, um you know, the world is not a, is a uh less safe place and it's probably gonna be unfortunately, continue to be that way for the foreseeable future.

Um You know, if they're both big positions in our uh celli commercial airspace and defense ETF GC ad and uh I like the long term secular, you know, again, the secular uh thesis, um the tail ends for, for both both companies, the defense uh business is probably gonna be, um you know, it's gonna be a huge backlogs for the foreseeable future.

They have an international business which they both are involved in which is a higher profitability, you know, higher margin business.

And that's gonna probably continue to grow as NATO looks to spend and, and get back to their 2% uh GDP target, which they're still below as a, as a, as a whole.

Um And, you know, in the US, again, historically, we're, we're well below our, our, our defense spending as a percent of GDP around uh 383.8% historically in the 6%.

And you know, China is not going anywhere, North Korea is not going anywhere.

Iran is not going anywhere.

And we have two kinetic wars that we're supporting in Ukraine and, and in the Middle East.

So I think there's a lot, unfortunately, a lot of work to be done for those two companies.

Certainly a lot of potential headwinds to look at moving forward.

Tony.

Thanks so much for joining us this morning.

Appreciate it.

Great.

Thanks so much.