The S&P/TSX Composite Index was down 102 points in early afternoon trading on Thursday, August 3. Some of the worst-performing sectors included utilities, information technology, and battery metals.
Today, I’m looking to target defence stocks on the Toronto Stock Exchange (TSX). Canada recently pledged to meet NATO’s 2% defence spending target. Indeed, military spending around the world has increased over the past decade. The bitter Russia-Ukraine conflict has only intensified calls for the Western powers to beef up their capabilities. Let’s dive in.
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This defence stock is on track for strong growth over the long term
Heroux-Devtek (TSX: HRX) is the first defence stock I’d look to snatch up in the middle of the 2023 summer season. This Quebec-based company is engaged in the design, development, manufacture, finishing, assembling, and repair and overhaul of aircraft landing gears and other aerospace parts and components. Shares of this defence stock have dipped marginally month over month at the time of this writing. The stock has climbed 18% so far in 2023.
Investors can expect to see Heroux-Devtek’s first batch of fiscal 2024 results on the morning of August 8. In the first quarter (Q1) of fiscal 2023, the company reported sales of $156 million — up from $147 million in Q1 2022. Moreover, it reported a funded backlog of $864 million. That was up 27% compared to the previous year.
Shares of this defence stock are trading in favourable value territory compared to its industry peers. Moreover, Heroux-Devtek is well positioned for strong earnings growth going forward.
Here’s why I’m targeting CAE in early August
CAE (TSX: CAE) is a Montreal-based company that provides simulation training and critical operations support solutions in Canada, the United States, and around the world. Its shares have jumped 1% month over month as of early afternoon trading on August 3. This defence stock has climbed 12% in the year-to-date period.
This company is expected to release its first batch of fiscal 2024 results on August 9. In fiscal 2023, CAE reported total revenue of $4.2 billion — up from $3.4 billion in the previous year. Moreover, adjusted earnings per share (EPS) rose to $0.88 compared to $0.84 in fiscal 2022. Adjusted segment operating income increased 23% year over year to $548 million.
CAE is on track for strong earnings growth in the quarters ahead. This is a defence stock worth snatching up in the beginning of August.
One more defence stock I’d look to target today
MDA (TSX: MDA) is the third defence stock I’d look to snatch up today. This Brampton-based company is engaged in the design, manufacture, and servicing of space robotics, satellite systems and components, and intelligence systems in Canada, the United States, and around the world. Shares of this defence stock are up marginally over the past month. Its stock has surged 33% so far in 2023.
Investors can expect to see this company’s next batch of earnings on August 11. In Q1 of fiscal 2023, MDA delivered impressive revenue growth of 57% to $201 million. Meanwhile, adjusted EBITDA shot up 77% to $48.9 million. MDA also reported a healthy backlog of $1.2 billion.
MDA currently possesses a price-to-earnings ratio of 30, which puts this defence stock in very attractive value territory compared to its industry peers. It is on track for strong earnings growth going forward.
