Top 20 Most Valuable Defense Companies in the World

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.