Defense Earnings Continue To Soar

July 30, 2007
Defense Earnings Continue To Soar

Several of Washington's largest defense contractors said last week that they continue to benefit from a boom in spending on the wars in Iraq and Afghanistan as well as sustained government demand for information technology, defying predictions that the sector's expansion would begin to slow.

Profit reports from Northrop Grumman, General Dynamics and Lockheed Martin showed particularly strong results in operations in the region. Though the wars have started to reduce the Pentagon's appetite for large, futuristic weapons that traditionally drive these companies' bottom lines, the shift in defense spending hasn't hurt profits.

"These are companies that don't turn on a dime," said Jon B. Kutler, founder of Admiralty Partners, an investment firm. "Even if you turned off the spending spigot tomorrow, defense companies would still have great cash flows for many years to come."