4 Stocks for a Donald Trump Comeback

While President Trump is down in the polls, there is still a good change he is re-elected for a second term. Here are four stocks that should benefit from such a scenario: Lockheed Martin Corp (LMT), Raytheon Technologies Corp (RTX), The GEO Group (GEO), and CoreCivic (CXW).

Recent polls reveal that President Donald Trump has garnered 41% support for the upcoming election. Though Biden is leading the presidential poll bid by 800 basis points (as of August 22nd), the polling system does not guarantee the final results. For instance, Hillary Clinton led the poll by 300 million votes before the 2016 election, but she ended up losing the election. So, there is a chance Trump will win.

Trump’s propaganda for 2020 is to “Keep America Great,” as his policies focus on tackling the problem of illegal immigration, offering tax cuts and promoting trade policies. Trump has floated the idea of complete decoupling of trade with China and multiple corporate tax cuts to make the U.S manufacturing industry more competitive. He has laid out a plan for building a wall between the United States and the Mexico to prevent illegal immigration, and building detention centers and a holding facility for the residing illegal migrants. His re-election campaign extols the victories of the Trump administration, with a promise to build on them, if re-elected.

Trump has a vested interest in the Aerospace sector as well, and he has openly advocated for the privatization of the industry. In the article ‘A New Era for Deep Space Exploration and Development,’ published by the White House on July 23rd, the incumbent president said, “Beginning with missions beyond low Earth orbit, the United States will lead the return of humans to the Moon for long term exploration and utilization, followed by human missions to Mars and other destinations.”

Companies such as Lockheed Martin Corporation (LMT), Raytheon Technologies Corporation (RTX), The GEO Group, Inc. (GEO), and CoreCivic, Inc. (CXW), operating in the aerospace, defense and private REIT sectors, stand to profit significantly if Trump gets re-elected for a second term.

Lockheed martin Corporation (LMT)

LMT is a private security and aerospace company operating in four segments: Aeronautics, Missiles and Fire control, Rotary and Missions Systems and Space Systems. President Trump has advocated for the importance of the Second Amendment Act, which allows individuals to own guns. He also announced his intention of privatizing the space industry, starting with the international space station.

As a lead manufacturer of guns and ammunition for the defense industry, and a prominent player in Aerospace, LMT has the potential for huge gains if Trump gets re-elected for a second term. LMT designed the technology behind the aeroshell to protect NASA’s newest Mars rover, deployed on July 31st. LMT also designed the Mars helicopter delivery system.

While the defense and aerospace industry has been facing headwinds amid the global pandemic, LMT’s net revenues increased 12.5% year-over-year to $16.20 billion in the second quarter ending June 2020. Net earnings of $1.6 billion improved 14.2% from the same period last year, while business segment operating profit of $1.79 billion grew 15.4% from the year-ago value.

The consensus EPS estimate of $6.09 for the third quarter ending September 2020 indicates a 7.5% rise year-over-year. LMT has an impressive earnings surprise history as well, as it beat the street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $16.10 billion for the third quarter indicates a 6.2% improvement from the year-ago value. LMT gained more than 55% since hitting its 52-week low of $266.11 in March. The stock hit its year-to-date high of $417.62 in July.

How does LMT stack up for the POWR Ratings?

A for Trade Grade

B for Buy & Hold Grade

A for Peer Grade

B for Overall POWR Rating.

It is also ranked #3 out of 65 in the Air/ Defense Services industry.

Raytheon Technologies Corporation (RTX)

RTX manufactures and supplies advanced systems and services to military, commercial users and government in the aerospace and defense industry. Its operations can be divided into four categories – Collins Aerospace systems, Pratt & Whitney, Raytheon Intelligence & Space and Raytheon Missiles and Defense.

Trump has supported the defense industry from the very beginning, with substantial funding throughout his tenure as president. The United States has the highest defense spending budget in the world, with an annual spending of approximately $738 billion. The second most defense savvy country is China, which spends around $260 billion annually for this sector, less than half of America’s budget.

On August 3rd, RTX entered into a joint venture with Israel-based RAFAEL Advanced Defense Systems to establish an Iron Dome Weapon System production facility in the United States. RTX’s defense sector delivered an impressive performance even during the pandemic, while the commercial aerospace industry had to bear the brunt of the healthcare crisis. Adjusted consolidated net sales of $14.27 billion for the second quarter ending June 2020 improved 26% from the same period last year.

Though the EPS outlook for the third quarter ending September 2020 is bleak, RTX has an impressive earnings surprise history. The company beat the consensus EPS estimates in each of the trailing four quarters. In fact, RTX’s EPS surpassed analyst estimates by more than 233%. RTX hit its 52-week high of $99.71 in February 2020, but hit its 52-week low of $43.44 in March, due to the virus driven market crash. It has gained more than 40% since then.

The GEO Group, Inc. (GEO)

GEO REIT invests in private prisons, correctional centers, mental health institutions, and processing and community reentry centers across the United States, Australia, United Kingdom and South Africa. Trump has hailed the private prison system since taking charge of the U.S. administration. He reversed the Obama administration's order to phase out the private prison system in his first year in office in 2017, and subsequently entered into a $110 million contract with GEO to build a private detention center.

With illegal immigration being one of the most controversial topics of the trump administration, the demand for immigration detention services have increased significantly. In his 2020 presidential re-election bid, Trump addressed the handling of the illegal immigration system by his administration, and vowed to further improve the situation.

Despite the temporary slowdown faced due to the virus driven recession, GEO has huge growth potential under trump administration. It delivered impressive results in the first two quarters of 2020. The company beat the consensus FFO estimates by 13.3% in the first quarter and 66.7% in the second quarter, respectively. GEO’s FFO is expected to grow at 15% per annum over the next five years. GEO gained more than 12% since hitting its 52-week low of $9.95 in march.

CoreCivic, Inc. (CXW)

CXW is another major REIT operating in the United States as a private contractor for correctional facilities. Trump’s economic policies against illegal immigration has surged profit levels of private prison centers. As Trump vows to protect American jobs and employment levels in the country, CXW is expected to profit under his leadership.

CXW’s shares soared more than 30% after Trump won the 2016 election. CXW’s business model is heavily reliant on the detainee population of the United States. 48% of its total revenue comes from various government contracts.  As Trump’s policies actively discourage illegal immigration, and the administration is taking various steps to contain it, CWX is expected to expand its operations to build larger detention camps if Trump is re-elected for a second term.

CXW’s FFO is expected to grow at 6% per annum for the next five years. Moreover, CXW beat the street FFO estimates in three out of trailing four quarters, which is impressive. CXW gained more than 10% since hitting its 52-week low of $8.33 in March.

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LMT shares were trading at $393.12 per share on Tuesday afternoon, down $1.92 (-0.49%). Year-to-date, LMT has gained 2.21%, versus a 7.85% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.


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