U.S. Defense Contractor CEOs See Profit Opportunity In Israel-Hamas War

The stock prices of major defense firms in the U.S. rose after Hamas attacked Israel on October 7, killing over 1,000 citizens and prompting retaliatory strikes that have killed many civilians in Gaza. Defense contractors Lockheed Martin, Northrop Grumman, and RTX—formerly Raytheon—all mentioned the potential business opportunities of the Israel-Hamas war on earnings calls this week.

Large companies typically run quarterly earnings calls that are open to the public. Executives go over the past few months of business, give an update on the projected earnings of the next quarter, and take questions from investors. As one might expect for an industry that specializes in selling the tools of war, executives touched on the war between Israel and Hamas. 

RTX CEO Greg Hayes began his call on October 24 by calling the events in Israel a tragedy. “Before we start, I want to spend just a minute acknowledging the tragic situation playing out in Israel today. It has been devastating to see what has unfolded there over the last couple of weeks and our thoughts and prayers are with the people impacted including the thousands of RTX employees that call Israel home,” he said. “With that said, let me turn to an update on our end markets.”

Biden requested an additional $106 billion in military funding for both Ukraine and Israel on October 18. If approved by Congress, some of the money would be used to restock Israel’s Iron Dome rocket defense system, which RTX manufactured. "I think really across the entire Raytheon portfolio, you're going to see a benefit of this restocking. On top of what we think is going to be an increase in DOD top line,” Hayes said of the budget request.

"Looking at this request, you've got equipment for Ukraine, air and missile defense for Israel, and replenishment of stockpile for both," Kristine Liwang, an analyst from Morgan Stanely said during the call. "And this seems to fit quite nicely with the Raytheon Defense portfolio."

Lockheed Martin’s earnings call happened days earlier on October 17. It manufactures the F-35 Joint Strike Fighter and also saw a rosy earnings outlook, in part, thanks to the Israel-Hamas war. Jim Taiclet, Lockheed’s CEO, called out Taiwan, Ukraine, and Israel specifically as places where money might be spent. “In any of these scenarios, there continues to be the option also for supplemental requests related to support Ukraine, Israel, and potentially Taiwan.” In July, Israel announced it would buy 25 more of the F-35 jets, which will cost $3 billion. 

Taiclet also noted the $106 billion budget request. “I think it's, again, a possibility that, given the rising tensions, there could be supplementals for Taiwan, in addition to, as we said, Israel and Ukraine,” he said.

Northrop Grumman was less specific during its October 26 earnings call, but still referenced the possibility of new weapons systems investments as a result of the Israel-Hamas war. 

"We are all witnessing significant geopolitical tensions across the globe, including the ongoing war in Ukraine and the horrific attacks in Israel,” CEO Kathy J. Warden said. 

Like the other two CEOs, Warden pointed to Biden’s funding request as an opportunity. “As we saw last week, the administration continues to make supplemental requests for urgent needs, including those in Ukraine and Israel, to include investments in weapons systems and defense industrial base readiness,” she said.