The US defense industry is benefiting from the war in Ukraine, but Swatch is growing less than expected and has sold more than a million “Moonswatch”.

When financial analyst Peter Arment examined the quarterly earnings of a leading US defense firm this week, he felt a little disappointed. “It looks like it should be better, very clearly,” Arment later said of the outcome during an analyst call – an allusion by the armaments specialist, who works for the financial house Baird, to the war in Ukraine, which has become one of the western countries increased the demand for American weapons systems.

Arment is not alone. Although the accusation that the industrial-military complex in the US is useful for the war in the Ukraine is heard again and again, especially in German-speaking countries, this is not initially reflected in the balance sheets of the four major US arms companies. Although the weapons of Lockheed Martin, Raytheon Technologies, Boeing and General Dynamics are in demand worldwide, there can be no windfall for the shareholders of the listed companies for the time being.

Profit drops at Raytheon, stagnates at General Dynamics

Just two examples. Raytheon’s “Missiles & Defense” division, which also produces the Patriot weapon system, which is currently in high demand, reported a revenue decline from $0.7 billion to $14.9 billion in 2022. Net profit fell year-on-year year by $0.4 billion to $1.6 billion, resulting in a decline in profit margin to 10.6 percent. (Raytheon also produces civilian goods. The defense division accounts for about a quarter of total group sales.)

In turn, the earnings of the “Combat Services” division of the armaments multinational General Dynamics, the manufacturer of the Abrams main battle tank, will stagnate at $ 7.3 billion in 2022. The division’s profit remained flat at just over $1 billion, a margin of nearly 15 percent. (The “Combat Services” division is responsible for about one-fifth of the company’s sales. General Dynamics also makes civilian products like the Gulfstream jet.)

These are solid numbers, even considering the supply chain and chips crisis that manufacturing companies have been dealing with in recent months. But the presentation of the quarterly results of the four major arms companies did not cause price fireworks on the American stock markets in the first half of the week. Year-to-date, the S&P Aerospace & Defense Select Industry Index is up 4.8 percent. The Nasdaq Composite rose 8.9 percent, while the leading index Dow Jones on the New York Stock Exchange recorded a plus of 1.8 percent.

The defense industry has full order books

This cautious reaction, of course, did not escape the attention of the armaments representatives. They are therefore delaying investors in the coming months, also with regard to the huge work backlog and the well-filled order books. Greg Hayes, CEO of Raytheon Technologies, said: “I think as we look at 2023 and then 2024,” the “Missiles & Defense” division has the “biggest growth potential” internally — also because the Pentagon is looking to restock its own arsenals, after the US has been supplying Ukraine with weapons and ammunition from its own stockpiles for the past eleven months.

It sounds similar to the competition, where the products of the leading American arms manufacturers often complement each other and do not directly compete. US President Joe Biden announced Wednesday that his administration would order 31 M1 Abrams main battle tanks from General Dynamics for Ukraine. This order alone could bring more than $300 million into the arms company’s coffers. “We have enough capacity,” General Dynamics boss Phebe Novakovic said Wednesday. (Still, it will likely be many months before the Abrams arrive in Ukraine, the White House says.)

The Pentagon has earmarked $145 billion for armaments

The treasury from which the US government wants to pay the bill for the new tanks is well filled, with an amount in the tens of billions expressly reserved for Ukraine. In addition, the Pentagon’s regular budget has earmarked some $145 billion for the purchase of new weapons systems. In comparison, the Swiss army wants to purchase weapons systems and new ammunition worth $ 0.8 billion this year.