As wars in Ukraine and the Middle East continue to rage, Vertical Research Partners forecasts top weapon manufacturers will experience record cash flow during the coming years.
The analysis, which was commissioned by the Financial Times, reports, "The leading 15 defense contractors are forecast to log free cash flow of $52 billion in 2026," with the "Five top US defense contractors are forecast to generate cash flow of $26 billion."
The cash flow in 2026 will be double the 2021 numbers. The record numbers are part of an upward trend for weapons makers already benefiting from a surge in global military spending and conflict.
This had led to some controversial policies among these firms at home:
Companies had already directed billions of dollars into share buybacks before the recent flood of new orders; some took on extra leverage to do so. Last year was the strongest for buybacks by aerospace and defence companies in both the US and Europe for the past five years, according to data from the Bank of America, although levels remain far below those of other sectors.
...The large repurchases using taxpayers’ money by US contractors have prompted criticism among some lawmakers who have questioned whether companies are investing enough in new facilities and production. Executives have insisted they are boosting capital spending even as they return money to investors.
Washington is driving the worldwide arms race. The US military budget is about the same as the next ten countries combined. Additionally, under President Joe Biden, Washington funneled billions in weapons to Ukraine, Israel, and Taiwan.
The policy has led to massive wars in Ukraine, Gaza, and Lebanon. Additionally, tensions in the South China Sea are boiling as Israel and Iran are on the brink of a potential direct war.
The White House is well positioned to deescalate many of the world’s conflicts. The US could push Israel and Ukraine to negotiate by leveraging Washington’s military aid to Tel Aviv and Kiev.
In the South China Sea, potential conflicts between China and Taiwan or the Philippines have been partially driven by Washington’s pledge to go to war against Beijing for Manila and Taipei.
The US has also given the Philippines and Taiwan hundreds of millions in weapons, further provoking China.
