Elbit Systems is Friday's IBD Stock Of The Day as both geopolitical and internal technological developments propel growth for the Israel-based contractor. ESLT stock, among the top-rated defense stocks, may be setting up for a new run. Its high power lasers, purported to shoot down incoming military drones or missiles at a fraction of the cost of current air defense systems, are expected to see deployment by the end of 2025.
Elbit Systems stock is near a buy point and above an early entry.
ESLT Among Top Defense Stocks
Elbit, due to report fiscal Q2 earnings on Aug. 13, has seen revenue growth accelerate for three straight quarters, to 22%. That was fueled not only by Israel's wars against Hamas, Hezbollah and Iran, but also a surge in European defense spending.
In Q1, 32% of Elbit's $1.896 billion in sales came from Israel, 24% from Europe, 21% from North America and 18% from Asia-Pacific countries. Elbit's order backlog rose 14% from a year ago to $23.1 billion. Roughly two-thirds of that backlog comes from orders outside of Israel.
ESLT has a 98 IBD Composite Rating out of a possible 99, according to IBD Stock Checkup. The single rating combines both fundamental and technical factors.
Defense stocks are currently the No. 5 top-performing industry group among 197, based on price performance and momentum.
Defense Spending 'Super Cycle'
The conflicts in Ukraine and the Middle East, along with President Donald Trump's push for NATO allies to increase defense spending, are "propelling this super cycle we are seeing in defense spend," Elbit CEO Bezhalel Machlis said. He made the comment on the May 20 earnings call. He noted the 5% of GDP target for defense-related spending by 2035 for NATO members, which are mostly based in Europe.
Elbit announced a $260 million order from Airbus to supply infrared self-protection systems on German Air Force A400M transport aircraft.
Iron Beam
In the May 20 call, Machlis highlighted the $200 million contract Elbit received from Israel in October 2024 to supply its high-power laser solution for Israel's "Iron Beam" project. The contract has positioned Elbit as "a global leader in high-power laser technology, both for land and airborne solutions."
"There is huge interest around this system," he added.
A June 4 report from The Jerusalem Post indicated that Israel's Iron Dome can shoot down incoming weapons at a cost of $40,000 per interceptor, while each Iron Beam laser costs around $3.
Meanwhile, Machlis said that deployment was on schedule to happen later this year, while work on an airborne interception system continues.
On July 24, BofA started coverage of Elbit with a buy rating and 500 price target. Analyst Ronald Epstein called the company a "leader in defense technology and innovation," according to a write-up by TheFly investment news site.
ESLT
ESLT stock dipped 0.6% to 463.85 in Friday stock market action, cutting its losses as it bounced off support near its 21-day exponential average. Elbit has a 476.04 buy point from a flat base.
Additionally, Investors can use 458.03 as an early entry.
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