In this article, we will be taking a look at the top 20 most valuable defense companies in the world. To skip our detailed analysis, you can go directly to see the top 5 most valuable defense companies in the world.
Defense spending has been increasing globally for years, and in the current geopolitical landscape, it is likely to just increase further. From 2013 to 2022, global military expenditure increased by 19% to land at more than $2.2 trillion, making up around 2.2% of the global GDP. Currently, there are two major wars which are impacting defense spending, which while bad for world peace and prosperity, are good for the most valuable defense companies in the world; namely the Ukraine Russia war and Israel Gaza war.
Few events have influenced global spending as significantly as the Ukraine Russia war, which began in February 2022 and is still ongoing with no signs of an end in sight. Based on the additional threat by Russia, the Western world has greatly increased defense spending, including the U.S., the country with the highest defense spending in the world. NATO, made up of predominantly European nations, has also seen defense spending increase, including providing military support to Ukraine. According to the Kiel Institute for the World Economy, around 238 billion euros have been pledged by countries across the world, with the U.S. being the biggest provider of military aid, amounting to over 42 billion euros.
While war may seem like a good time to load up on defense stocks including the most valuable defense companies in the world, the answer is not as clear cut as it seems. On first glance, it seems to be a no brainer considering that when wars take place, defense spending increases which results in more contracts to defense companies by governments, and hence result in an increase in revenue. This seems to be backed further by the fact that after the Russia Ukraine conflict began, aerospace and defense stocks outperformed global stocks overall, but a large part of this outperformance occurred before the conflict even began. From October 2022 to January 2023, aerospace and defense stocks increased by 23.9% as opposed to MSCI World's 12.3%, but even then, some of the most valuable defense companies in the world still underperformed the broader market. Even in 2006, after the Israel-Hezbollah war began, the top aerospace and defense stocks rose sharply initially but then fluctuated in no discernible pattern for the next 12 months, thus lending credence that there isn't a direct co-relation between wars and defense stock prices.
Lockheed Martin Corporation (NYSE:LMT), one of the most valuable defense companies in the world, has seen its stock drop by nearly 7% YTD 2023. Despite the stock price drop, Lockheed Martin Corporation (NYSE:LMT) was optimistic regarding additional potential orders due to conflicts such as the Israel-Gaza war and Russia-Ukraine war, stating in its Q3 2023 earnings call "At that point, one of the following could occur: FY '24 appropriations bills will be enacted, Congress will enact another partial or whole CR, or there could be a partial or full government shutdown. In any of these scenarios, there continues to be the option also for supplemental requests related to support Ukraine, Israel, and potentially Taiwan. As Congress continues to work through the FY '24 appropriations bills, we are optimistic that there will be consistent support for the national defense strategy and funding for its priorities. In the meantime, we will continue to work with our customers and suppliers to minimize any potential disruptions due to the process, and we will press on with executing our 21st Century Security strategy of building capacity, efficiency, and resilience into our production operations, driving advanced digital technologies to enhance integrated deterrence, and expanding our international business and operations." The company further mentioned the huge potential of its F-35 aircraft, stating "“The superior technological capabilities of the F-35 continue to generate strong interest both domestically and internationally. In September, Denmark's first four locally based F-35 aircraft arrived on their home soil. Denmark's program of record calls for 27 F-35A aircraft. Also in September, the Czech Republic chose to become part of the global F-35 Lightning II program, and the U.S. State Department approved a possible $5 billion foreign military sale to South Korea for up to 25 F-35 Joint Strike Fighters. Earlier in the quarter, Israel announced that we'll buy an additional 25 F-35, which will add a third squadron and increased its F-35 fleet to 75 aircraft.”
In the wake of Russia's invasion of Ukraine, most European countries have significantly increased their own defensive capabilities and spending, in addition to providing aid and military supplies to Ukraine. Unsurprisingly, the U.S. is the biggest weapons exporting country in the world, which is why a lot of the most valuable defense companies in the world are based in the U.S. One such company, Raytheon Technologies Corporation (NYSE:RTX), was recently awarded a contract worth $1.15 billion in June 2023 for its advanced missiles, though this hasn't been enough to sustain its stock price, which has declined by nearly 20% YTD 2023.
Methodology
To determine the 20 most valuable defense companies in the world, we checked the largest defense companies in the world right now, and then confirmed their latest market cap from Yahoo Finance. Where a company was based in a foreign country, generally Europe, we converted their market cap to USD for a uniform and accurate comparison. For private defense contractors, we used the average market cap to sales ratio for public defense companies and applied it based on revenues of private companies to assign them a market cap.
Estimate market cap as at 11 November 2023 (in millions): $5,195 Leonardo DRS, Inc. (NASDAQ:DRS) is based in the U.S. but owned by Italian company Finmeccanica. Leonardo DRS, Inc. (NASDAQ:DRS) earned an order of more than $134 million for production of its next-gen thermal weapons for the U.S. army.
Estimate market cap as at 11 November 2023 (in millions): $6,653 China North Industries Group has been involved in the negotiation of an arms deal between Egypt and Saudi Arabia, while Algeria is also purchasing heavily from China, with the company again being involved.
Market cap as at 11 November 2023 (in millions): $9,134 Huntington Ingalls Industries, Inc. (NYSE:HII) is the biggest military shipbuilder in the U.S., and is currently just slightly below its 52-week high. In November 2023, Huntington Ingalls Industries, Inc. (NYSE:HII) signed an MoU with the Western Australian government to boost its maritime defense industry.
Market cap as at 11 November 2023 (in millions): $11,471 The Aviation Industry Corporation of China may have been sanctioned by the U.S. despite being one of the biggest military contractors in the world, but has still continued to thrive.
Market cap as at 11 November 2023 (in millions): $12,718 Rheinmettal AG is the biggest German defense contractor, and its stock price has climbed by nearly 43%. The company's CEO expects a further increase in stock price, with the company potentially being valued at 17 billion euros.
Market cap as at 11 November 2023 (in millions): $14,239 Leidos Holdings, Inc. (NYSE:LDOS) has partnered with Microsoft recently, in a sign indicating the growing influence of artificial intelligence on the defense industry. This is also enabling Leidos Holdings, Inc. (NYSE:LDOS) to distinguish itself from other military contractors and recently won a $15 million army contract for integrating and testing Mission Systems Flying Test Bed integration.
Market cap as at 11 November 2023 (in millions): $15,533 France has the second-highest number of entries in our article, and Dassault Aviation is involved in the manufacture of military aircraft. Dassault Aviation is one of several defense companies in France which are increasing recruiting amid growing demand.
Market cap as at 11 November 2023 (in millions): $16,428 One of the best performing defense stocks among the most valuable defense companies in the world, Booz Allen Hamilton Holding Corporation (NYSE:BAH) saw its share price increase by nearly 25% YTD 2023.
Market cap as at 11 November 2023 (in millions): $16,530 By far the largest defense company in India, Hindustan Aeronautics is also one of the oldest defense companies in the world, having been established in 1940. The company is currently working with Airbus to develop the India-based A320 MRO facility.
Market cap as at 11 November 2023 (in millions): $30,962 Thales is a French defense company which works primarily on devices and equipment for the industry. It is one of the few defense companies which has seen its share price increase, registering a jump of nearly 15% YTD 2023.
Market cap as at 11 November 2023 (in millions): $34,529 L3Harris Technologies, Inc. (NYSE:LHX), one of the top 10 most valuable defense companies in the world, L3Harris Technologies, Inc. (NYSE:LHX) recently teamed up with Kraken to further advance the K40 USSV platform.
Market cap as at 11 November 2023 (in millions): $41,534 BAE Systems is the most valuable defense company in the UK and one of the most valuable defense companies in the world. After a strong third quarter in 2022, BAE Systems maintained its annual earnings guidance as demand continued to rise amid high geopolitical tensions.
Market cap as at 11 November 2023 (in millions): $64,091 Safran is the most valuable French defense company, and in November 2022, Sarfran purchased Syrlinks, a radio-communication and radio-nagivation company.
Market cap as at 11 November 2023 (in millions): $66,464 General Dynamics Corporation (NYSE:GD) recently won a bid to provide aid to Virginia class submarines, and its Q3 earnings per share of $3.04 soundly beat analyst expectations. General Dynamics Corporation's (NYSE:GD) saw its combat systems segment revenue increase by over 24.4% year-on-year in Q3 2023, landing at over $2.2 billion.
Market cap as at 11 November 2023 (in millions): $69,858 Northrop Grumman Corporation (NYSE:NOC) works with several governments across the world, and recently, enable Australia to launch its first MQ-4C Triton flight. Currently, Northrop Grumman Corporation (NYSE:NOC) is spending $200 million to establish a defense facility in Waynesboro, which will result in the creation of hundreds of jobs.
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Disclosure: None. Top 20 most valuable defense companies in the world is originally published at Insider Monkey.
