Sunday, August 6, 2017

Defense Contractors - Is War Profitable?

Companies like Boeing get some of the revenue from selling consumer (civilian) hardware, and some from defense. Other companies are far more dedicated to producing military hardware (north of 90% of their sales in some cases.) Of the top 10 defense contractors in the world per Wikipedia, I looked only at the 7 U.S. ones that would exist in a similar tax and regulatory environment. The correlation is that the more arms sales, the less revenue.

So why be a defense contractor then? What often matters more is measures of unit profitability (indices like EPS, P:E - or if you're an employee, profitability per employee.) And sure enough, excluding outlier L3, the more military business, the more profitable per employee.

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