The world’s top 15 government contractors in the defense industry are forecast to generate a staggering $52bn in free cash flow by 2026. This is due to a significant surge in government orders recently, driven primarily by the ongoing conflicts in Ukraine and Israel.
Leading US Defence Contractors on a Spree
An analysis performed by Vertical Research Partners suggests that five top US defense contractors are expected to generate cash flow of $26bn, more than double the amount in 2021.
The likes of Lockheed Martin, RTX (formerly Raytheon), Northrop Grumman, Boeing, and General Dynamics - together with their suppliers - were recently allocated nearly $13bn for weapons production amidst conflicts and rising geopolitical tensions in Ukraine, Taiwan, and Israel.
These contractors are known to have a long-standing relationship with the US federal government and government sales usually contribute a large portion of their revenue. The table below shows the share of revenue attributed to the US government and all other government agencies in Q1 2024 for Lockheed Martin, Boeing, and RTX.
| Company | US Government Sales % (Q1 2024) | Total Government Sales %(Q1 2024) |
| Lockheed Martin | 74.6% | 93% |
| Boeing | 47% | 54% |
| RTX | 42.1% | 54.9% |
Table 1. Defense Suppliers Government Sales Share out of Total Sales (Q1 2024)
The Renaissance of Defense Spending in Europe
On the other side of the Atlantic, a similarly impressive cash flow increase is expected. BAE Systems, Rheinmetall and SAAB have all benefited from receiving government orders for ammunition and missiles, which are likely to generate a combined cash flow increase of more than 40%.
Furthermore, in a potentially milestone development for Rheinmetall, August 2024 saw the company announce a $950m deal to take over the Michigan-based military vehicle parts maker Loc Performance.
According to the German government contractor, the deal is likely to increase its chances of winning US military contracts, thus opening up immense opportunities for establishing a presence in the US market.
Meanwhile, across the Channel, the Ministry of Defense in the UK has committed £7.6bn for military aid to Ukraine over the past three years, including for stockpile replenishment.
Understanding the Need for Government Procurement Data to Monitor Defense Spending
It remains to be seen how the defense industry is going to spend the money coming its way. Share buybacks and dividends are two potential options, but whatever decisions the key players take, the fact of the matter is that government orders will continue to have a significant and lasting impact on the industry.
The current outlook for defense spending is strong, but it is important to consider potential future scenarios and remember that an end to the war in Ukraine is likely to reduce demand and lead to a gradual decline in orders.
Nevertheless, both the increased government spending in the defense sector now and potential fluctuations in the future make for a solid argument in favor of monitoring awarded government contracts data.
Referencing Contract Awards Data in Investment Analysis
The ticker-mapped TenderAlpha Global Government Contract Awards Data Feed allows you to receive newly-awarded defense contract information, with all its key details, shortly after it has been announced. Our flagship product is a must-have resource for investors looking to boost their investment decision-making process and predict the performance of the stocks under their radar.
The data feed contains more than 120 million government contracts across all industries from over 65 countries, including the US, the UK, the entire EU, and geopolitical competitors such as China and Russia.
With history going as far back as 2010, the contract awards data opens up a range of possibilities to analyze the public procurement market from historical and ongoing perspectives alike, track government priorities, and discover companies with a significant potential due to their strategic positioning and government contract wins.
Power Investment Analysis with Unique Government Supply Chain Analysis
The public procurement data can be coupled with the transactional US Federal Government Subcontracting and Government Supply Chain data feeds for valuable insights into the direct and indirect suppliers of the leading defense contractors worldwide, thus allowing for a robust analysis of their supply chain stability.
The data containing hundreds of thousands of ticker-mapped B2B transactions can highlight potential risks by zooming in on dependencies on a single supplier or a concentration of suppliers in a particular region that at a time might be experiencing political or economic turmoil.
By keeping abreast of underlying dynamics of the defense industry’s supply chains, investors will be quicker to act upon emerging trends and maintain a competitive edge in the ever-present game of fine margins.
To learn more about TenderAlpha’s data packages, get in touch now!