Defense and Homeland Security Sector Ideas

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>>> 20 companies profiting the most from war



24/7 Wall St.

by Samuel Stebbins and Thomas C. Frohlich



http://www.msn.com/en-us/money/savingandinvesting/20-companies-profiting-the-most-from-war/ar-AAmTAzm#page=21




1. Lockheed Martin



> Arms sales: $36.44 billion
> Total sales: $46.13 billion
> Profit: $3.61 billion
> Employees: 126,000

Maintaining its position as the world’s largest defense contractor, Lockheed Martin's revenue from arms sales totaled $36.44 billion in 2015. The company’s reach into military and defense technology is difficult to overstate. Lockheed and its subsidiaries manufacture many of the U.S. military’s workhorses, including the F-16 and F-22 fighter jets, the Black Hawk helicopter, and the Vector Hawk unmanned drone. The company also designs and manufactures air-to-air missiles and missile defense systems.

Like many other major defense contractors, Lockheed’s biggest customer is the U.S. government -- accounting for 78% of the company’s 2015 net sales, the vast majority of which came from the DoD.



2. Boeing



> Arms sales: $27.96 billion
> Total sales: $96.11 billion
> Profit: $5.18 billion
> Employees: 161,400

Chicago-based Boeing is not nearly as dependent on federal spending as other major U.S. contractors. Less than one-third of Boeing’s 2015 revenue of $96.11 billion came from its defense, space, and security operations. The remainder was attributable to Boeing’s commercial airplane business. Of the revenue generated from defense contracts, 62% came from sales to the U.S. DoD.

Like many large U.S. manufacturing companies, including top government contractors, widely expected higher military spending under President Trump will certainly help Boeing. Favorable outcomes under Trump are not guaranteed, however. While the Air Force signed deals with Boeing last year to design parts of Air Force One, for example, Trump, citing concerns over cost, called for the deal to be cancelled.




3. BAE Systems (UK)



> Arms sales: $25.51 billion
> Total sales: $27.36 billion
> Profit: $1.46 billion
> Employees: 82,500

Some 93% of BAE Systems’ $27.36 billion in 2015 revenue came from defense contracts. The company manufactures a range of military equipment, including war ships, munitions, amphibious combat vehicles, and fighter jets. BAE is the company behind the Harrier jet, capable of take-off with a short runway, as well as vertical landings. Cyber security and intelligence services also comprise a small share of the company’s business.

Though BAE Systems is headquartered in the U.K., deals with the British government comprise less than a quarter of the company’s annual revenue. BAE’s biggest clients are in the United States, with corporate and government contracts comprising over a third of the company’s total 2015 revenue. BAE’s other major markets include Australia and Saudi Arabia.



4. Raytheon



> Arms sales: $21.78 billion
> Total sales: $23.25 billion
> Profit: $2.07 billion
> Employees: 61,000

Waltham, Massachusetts-based Raytheon is known for its missiles and missile defense systems. According to the company, 13 countries use primarily Raytheon air and missile defense. This January, the U.S. Navy awarded Raytheon a $235 million contract to supply missiles for Aegis cruisers and destroyers.

Raytheon purchased cybersecurity provider Websense in 2015 for $1.9 billion. The deal was an indication of the growing threat of cyberattacks, as well as Raytheon’s effort to diversify and move into commercial markets and away from dependence on defense contracts.




5. Northrop Grumman


> Arms sales: $20.06 billion
> Total sales: $23.26 billion
> Profit: $2.0 billion
> Employees: 65,000

Northrop Grumman was awarded in October 2015 the highly coveted $80 billion contract to supply the U.S. military with 100 long-range strike bombers. The deal is the biggest from the Pentagon in more than a decade. The B-2 Spirit stealth bomber is the predecessor of the newly named B-21 Raider.

The company's 2015 arms sales, valued at $23.26 billion, included $1.8 billion for the F-35 fighter jet program, $1.1 billion for the E-2D Advanced Hawkeye early warning aircraft program, and $947 million for the Saudi Arabian Ministry of National Guard Training Support program.




6. General Dynamics



> Arms sales: $19.24 billion
> Total sales: $31.47 billion
> Profit: $2.97 billion
> Employees: 99,900

General Dynamics manufactures and sells a range of military equipment, including ammunition, amphibious vehicles, armoured vehicles, and combat tanks. In addition, General Dynamics owns Bath Iron Works, a naval shipyard that is currently under contract to build the U.S. Navy’s new Zumwalt Class DDG-100 destroyer. The ship costs approximately $4 billion.

Well over half of General Dynamics’ revenue comes from arms sales, the vast majority of which are through contracts with the U.S. DoD. Only 13% of the company’s 2015 revenue came from contracts with foreign governments.




7. Airbus Group (Europe)



> Arms sales: $12.86 billion
> Total sales: $71.48 billion
> Profit: $3.0 billion
> Employees: 136,570

Europe’s largest aircraft manufacturer, Airbus Group, has three divisions: commercial, defense and space, and helicopters. The company is the largest helicopter manufacturer in the world, with a 47% market share. Most of helicopters the company sells are for military purposes. Other military related products include cybersecurity technology development as well as fighter jet and unmanned drone manufacturing.

Despite ranking among the world’s largest defense contractors, less than a fifth of Airbus’s 2015 revenue were weapons related. The company also manufactures a range of non-military satellites, and it delivered 635 commercial aircraft in 2015.



8. United Technologies



> Arms sales: $9.50 billion
> Total sales: $61.05 billion
> Profit: $4.36 billion
> Employees: 197,200

A major conglomerate with interests in a range of industries, United Technologies reported over $61 billion in sales in 2015, only 16% of which came from defense contracts. Still, the company ranks as the eighth largest defense contractor in the world. The company’s aerospace division develops and manufactures a range of military technology, from submarine stealth composites to fighter jet ejection seats. Pratt & Whitney, a United Technologies subsidiary company, manufactures engines used in military aircraft worldwide, including the F-22 Raptor and F-16 fighter jets. Pratt & Whitney accounted for $4.23 billion of the company’s total 2015 sales.

United Technologies’s commercial subsidiaries include air conditioning unit manufacturer Carrier and Otis, the world’s largest elevator installer and maintainer.




9. Finmeccanica (Italy)


> Arms sales: $9.30 billion
> Total sales: $14.41 billion
> Profit: $584 million
> Employees: 47,160

Italian aerospace company Finmeccanica, after a wave of restructuring, mergers, and consolidation, was renamed Leonardo in the middle of last year. The change somewhat reflects the financial struggles of companies that depend on government spending in European countries, many of which have implemented severe austerity measures in recent years. Finmeccanica posted in 2011 a net loss of $3.0 billion, which the company attributed to ongoing corruption probes in Italy but also partially to market fluctuations across the continent. At the end of last year, the Canadian government selected Airbus Group over Leonardo for a contract to replace the country’s 19 search-and-rescue planes.

The company remains one of the largest military procurement companies in the world, and as of its latest fiscal year had returned to profitability.




10. L3 Communications


> Arms sales: $8.77 billion
> Total sales: $10.47 billion
> Profit: $282 million
> Employees: 38,000

L3 Communication divides its business into three segments: electronic systems, aerospace systems, and communication systems. Though the company has private and commercial clients, including airports worldwide that use L3’s screening technology at security checkpoints, it is primarily a defense contractor.

Defense contracts accounted for some 84% of the company’s $10.47 billion in 2015 sales. Recently, the company won a contract with the U.S. Navy to manufacture power distribution and switchgear components for Virginia Class Submarines.




11. Thales (France)



> Arms sales: $8.10 billion
> Total sales: $15.60 billion
> Profit: $897 million
> Employees: 62,190

Involved in ground transportation and communications, avionics, naval systems, and cybersecurity, Thales’ business encompasses nearly every aspect of military technology. The French company signed major defense contracts with Australia, Egypt, and Qatar in 2015, driving sales to $8.10 billion, up over $900 million from the year before.

Still, defense only accounts for about half of the Paris-based company’s business. Thales also designs and manufactures satellites and electronic aeronautic equipment for commercial and scientific use.




12. Huntington Ingalls Industries



> Arms sales: $6.74 billion
> Total sales: $7.02 billion
> Profit: $404 million
> Employees: 35,500

Though it is a private company, Huntington Ingalls Industries plays a crucial role in the U.S. defense and military strategy. The company is the sole manufacturer of aircraft carriers for the U.S. Navy and one of only two companies contracted to build nuclear-powered submarines. In addition to its headquarters, the company has manufacturing facilities in Newport News, Virginia. Huntington is one of the largest employers in Virginia and the largest shipbuilding company in the United States.

The company has a number of subsidiaries, including UniversalPegasus International, an oil and gas infrastructure project management company. Still, military contracts accounted for some 96% of the company’s 2015 sales




13. Almaz-Antey (Russia)



> Total sales: $6.97 billion
> Profit: N/A
> Employees: N/A

Russia’s national military expenditure dropped from third to fourth place in 2015, as Saudi Arabia moved up to third largest arms spender. More recently, despite tightening budgets from falling oil prices, Russia announced increased military spending in its 2017-2019 budget.

Despite the budget fluctuations, state-owned Almaz-Antey is one of several Russian defense companies to rank among the top global arms producers in recent years. Like most large defense contractors, the missile maker’s operations are heavily dependent on both government budgets and demand from governments in the region. India, which increased its military spending by 46% between 2006 and 2015, is one Almaz-Antey’s largest customers.



14. Safran (France)



> Arms sales: $5.02 billion
> Total sales: $19.31 billion
> Profit: $1.64 billion
> Employees: 70,090

In the latest move towards industry consolidation, French aerospace manufacturer Safran agreed in January to buy fellow French arms maker Zodiac Aerospace. The merged companies form one of the world’s largest aerospace suppliers by revenue.

Safran makes one of the best selling jet engines, the CFM56, used mainly in Boeing and Airbus planes. The United States -- the U.S. government and U.S. based companies -- is by far the largest player in the global arms market. As it is therefore true for most military contractors, the U.S. is a major customer of Safran. Safran helicopter engines and other parts such as wheels and brakes are used by the Coast Guard and other branches of the military





15. Harris



> Arms sales: $4.92 billion
> Total sales: $7.47 billion
> Profit: $324 million
> Employees: 21,000

Harris Corp. reported $4.92 billion in defense contracts in 2015, up from $3.11 billion the previous year. Responsible for the electronic components equipped in the F-22 and F-18 fighter jets, the company has several lucrative deals with the U.S. DoD. Harris has also worked in the increasingly relevant areas of electronic warfare and cyber security for decades.

Harris Corp. deals primarily with the U.S. government and no single foreign government accounted for more than 5% of the company’s total revenue last year. All told, defense contracts accounted for roughly a third of the company’s total sales in 2015.




16. Rolls-Royce (UK)



> Arms sales: $4.79 billion
> Total sales: $20.40 billion
> Profit: $1.65 billion
> Employees: 50,500

The Rolls-Royce brand is typically associated with luxury automobile manufacturing. However, a significant portion of the company’s business is power systems development, ranging from nuclear propulsion for naval vessels to jet engines.

Rolls-Royce manufactures a dozen engines that power military helicopters and fighter jets, as well as the U.S. Air Force’s C-130 Hercules military transport aircraft. Defense contracts accounted for over one-fifth of the company’s total 2015 revenue. The London-based company is the second largest defense contractor in the U.K.




17. United Aircraft (Russia)



> Arms sales: $4.61 billion
> Total sales: $5.77 billion
> Profit: -$1.79 billion
> Employees: N/A

United Aircraft Corp. is one of three Russian companies to report at least $4 billion in annual weapons sales. Despite lucrative military contracts, the company is in the red, posing a $1.79 billion loss in 2015. United Aircraft has lost money in each of the four prior years as well. The company attributed its losses to its emphasis on long-term investment and growth, and anticipates profitability by 2025.

United Aircraft manufactures a range of civil and transport aircraft. However, weapons and military aircraft, including the iconic MiG fighter jet, account for some 80% of the company’s sales.



18. Bechtel


Instead of seeing red, Pentagon audit managers saw business as usual after being told that Bechtel failed to open all its books for review.

> Arms sales: $4.60 billion
> Total sales: $32.30 billion
> Profit: N/A
> Employees: 53,000

Bechtel is a private engineering firm that builds critical infrastructure, provides environmental cleanup and management services, operates dozens of mining operations, and serves as defense contractor in 160 countries. Defense contracts accounted for 14% of the company’s 2015 sales, a relatively low share compared with other major defense companies.

The company has contracts with both the U.S. Navy and Department of Defense, developing nuclear propulsion systems for submarines and aircraft carriers and disassembling retired chemical weapons.



19. United Shipbuilding (Russia)


Arms sales: $4.51 billion
> Total sales: $5.20 billion
> Profit: $230 million
> Employees: 80,000+

United Shipbuilding Corp. is one of three Russian companies to report more than $4 billion in revenue from arms deals alone in 2015. Total weapons sales at the company, Russia’s largest shipbuilder, were up $159 million from 2014. The company manufactures more than two dozen different military submarines and warships for the Russian Navy and customers abroad, in addition to several vessels for commercial use.

The company was established in early 2007 in accordance with a decree issued by President Vladimir Putin.


20. Booz Allen Hamilton


> Arms sales: $3.90 billion
> Total sales: $5.40 billion
> Profit: $294 million
> Employees: 22,600

Management, technology, consulting, and engineering company Booz Allen Hamilton has worked closely with U.S. defense agencies since WWII. It is one of the top military equipment contractors in the world. According to the company, $2.6 billion of its fiscal 2016 revenue came from defense clients, roughly half of total revenue. SIPRI pegs total arms sales from Booz Allen at $3.9 billion in 2015.

A significant portion of Booz Allen Hamilton’s military-related procurements is related to cybersecurity. Based on analysis from the company, cybersecurity threats will continue to increase in the United States and around the world.

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