Canada has announced its biggest increase in military and defense spending since the outbreak of the Second World War, news that is seen as positive for leading U.S. defense contractors.
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At a NATO Summit, Canadian Prime Minister Mark Carney committed that Canada will invest 5% of its gross domestic product (GDP) in defense by 2035, a pledge that will mean billions more in spending per year and the biggest increase in Canada’s military budget since World War II.
The 5% will be broken down into two parts, with the first 3.5% aimed at core defense needs including advanced military jets and weapons, and the remaining 1.5% to be spent on defense-related investments that include naval ships and infrastructure.
Earlier this month, Carney announced Canada would spend an additional $9.3 billion on defense in order to meet NATO’s previous 2% GDP target this fiscal year, after mounting pressure to do so from allies, notably the U.S. The additional spending is expected to be a boon for defense contractors such as Lockheed Martin (LMT), RTX Corp. (RTX), and Northrop Grumman (NOC).
Big Increase
In all, Canada is expected to spend $62 billion on its military and related defense this year. In media interviews, Prime Minister Carney said reaching 5% of GDP would amount to Canada spending $150 billion a year on defense by 2035.
Canada’s prime minister added that the country plans on reaching the 5% target through measures such as developing critical minerals. U.S. President Donald Trump has long pushed for NATO members to increase their defense spending and publicly complained about allies like Canada taking advantage of U.S. security. On June 25, Trump called the new military spending pledge from Canada a “big win.”
Is LMT Stock a Buy?
The stock of Lockheed Martin has a consensus Moderate Buy rating among 14 Wall Street analysts. That rating is based on seven Buy and seven Hold recommendations issued in the last three months. The average LMT price target of $523.79 implies 14.02% upside from current levels.
