Halloween's over, the weather's turned frigid, and the holiday season is on its way.
Soon we'll be putting 2023 to bed and waking up to 2024 — a year that somehow promises to be even more chaotic than this one, with a looming presidential election.
So how will the rest of the year play out? And what have we learned?
Well, we've got plenty of data to lean on to answer those questions — beginning with third-quarter earnings which continue to trickle in.
For example, General Dynamics (NYSE: GD), which I've been pitching as a major supplier of ammunition and weapons, had a fantastic quarter.
The company reported a 6% increase in revenue, which totaled $10.6 billion.
It also torched earnings estimates with EPS of $3.04, clearing the Wall Street estimate of $2.87 by 6%.
And the company's backlog hit a record high $95.56 billion, fueled by a staggering 9% improvement in just three months' time.
Indeed, the growth for General Dynamics isn't just coming year over year — it's coming quarter over quarter .
The company's third-quarter results topped second-quarter revenue by 4.1%, operating earnings by 9.9%, net earnings by 12.4%, and EPS by 12.6%.
The war in Ukraine has been an obvious driver here, as it's absorbed tons of ammunition and weapons platforms that will need to be backfilled, including 155mm artillery shells, and combat vehicles like the Stryker and Abrams tanks.
To that end, GD has gone from producing 14,000 155 mm rounds per month to 20,000 and is working with the Pentagon to further expand production to 100,000 rounds per month in the years ahead.
That effort is already ahead of schedule.
There's $322 Billion Worth of Lithium in Northwest Alberta...
Why Can't Anybody Touch It?
For more than 40 years, an oil company has been working a 671-square-mile chunk of northwestern Alberta, producing its lifeblood using brine that's kept in hundreds of massive storage ponds.
These storage ponds have long been known to contain a massive lithium resource, totaling an estimated 4.3 million tons.
Just recently a tiny Vancouver-based technology company, founded and headed by petrochemical industry veterans, figured out a way to extract the lithium from this brine, very quickly and very efficiently.
So efficiently, in fact, that the company can filter this oil field brine, returning it to the pond after processing, with a better than 95% capture rate.
Production of salable lithium will cost between $3,000 and $4,000 per ton, while market rates price lithium at $70,000 per ton.
They know where the lithium is, they know how to extract it, and, as of now, they have an agreement in place to work this giant lithium-rich property.
Commercial production is now projected to be in place by the middle of 2024, with buyers already lining up.
Interested? Enter here to learn more.
Northrop Grumman (NYSE: NOC) has been another success story.
It reported a 9% increase in sales, totaling $9.8 billion, up from $9 billion in the Q3 2022.
Net earnings, meanwhile, totaled $937 million, or $6.18 per diluted share, compared with $915 million, or $5.89 per diluted share, a year ago.
And like GD, Northrop's backlog hit a record-high $84 billion.
Said Northrop Grumman President, CEO, and Chair Kathy Warden:
We had another strong quarter with solid performance on our programs, a new record backlog, and growth across all four of our businesses. Based on our year-to-date results and increasing demand for our products, we are raising our 2023 sales guidance. We are also providing an initial 2024 outlook that reflects our expectation for solid revenue, operating income, and free cash flow growth.
That last part is important because, as Warden makes clear, things aren't just good — they're getting even better going forward.
And finally, RTX (NYSE: RTX), known by most as Raytheon, found success, as well — despite a massive recall effort that tanked the stock earlier this year.
Indeed, just a few months ago the company discovered that 3,000 Pratt & Whitney jet engines needed inspections for potentially flawed components.
That resulted in a $5.4 billion sales charge and $2.9 billion hit to operating profit.
Nevertheless, RTX still logged adjusted earnings growth of 3.3% and adjusted sales growth of 12%.
Both of those results exceeded analyst expectations, which anticipated 9.7% sales growth and an 82% drop in GAAP earnings.
Again, staying on theme, the company's backlog hit a record high $190 billion for the quarter, including $115 billion of commercial orders and $75 billion of defense orders.
And it projected fourth-quarter results at the high end of its previous guidance.
Those earnings and the outbreak of war in Israel sent all three of these companies soaring over the past month, even as the broader market struggled.
General Dynamics is up 10% over the past month, Northrop Grumman is up 11.5%, and RTX overcame its earlier mishap to surge 18%.
This is complete vindication of the defense-heavy strategy I've been pushing for the past five years.
But the key takeaway today isn't that we were right about something.
It's that the trend in question has more room to run.
The Ukraine war has bogged down into a bloody stalemate, and further funding is facing some serious political headwinds. But that doesn't change the fact that our military must now replace, upgrade, and backfill the weapons and ammo we've dispatched there.
Nor does it change the fact that defense budgets around the world continue to soar due to emerging threats from Russia, China, and Iran.
This isn't some short-term blip of worldwide chaos. It's the new normal.
Of course, while these big-name defense contractors will continue to deliver strong and steady returns over the next one, five, and 10 years… there are even bigger gains to be had with smaller military technology suppliers.
For example, the company detailed in my latest report popped 20% in a single day last week due to a massive earnings beat of its own.
This company's technology is the key to applying AI to modern warfare.
So check that out here if you haven't already.
Fight on,
Jason Simpkins
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