Earnings season is back and ready to really kick 2023 into gear for markets. All sorts of firms are ready to report this week, but one firm to watch may be the aerospace and defense firm L3Harris (LHX) given the growing need worldwide for defense and surveillance systems as geopolitical risk continues to grow. For investors who find the space appealing, consider an aerospace ETF like the ARK Space Exploration & Innovation ETF (ARKX).
Last year saw one of the biggest geopolitical events in more than a decade break out with Russia invading Ukraine. Warfare has highlighted the changing nature of aerospace and defense technology. Drones as well as advanced command and control technology are becoming increasingly important, with firms like LHX, reporting its earnings Thursday, poised to benefit.
LHX hasn’t had the eeriest of months in terms of its price but remains resistant to one of the year’s biggest looming challenges: rising interest rates. Higher rates are certainly in the cards looking to the first half of this year, with some suggesting the Fed may even exceed its previously-signaled terminal rate suggestions. According to at least one market analyst, LHX has a strong growth outlook for the next few years and less than average debt, boosting its resistance to rates.
ARKX has a higher weight toward LHX than any other ETF according to VettaFi. The aerospace ETF weights the stock at 5.3% and has outperformed both its ETF Database Category Average and Factset Segment Average over one month. It has returned 6.2% in that time compared to 2.5% and 5% for the other averages respectively. Its returns have increased compared to its three-month return of 3%, entering the new year with renewed vigor.
Investors have a lot of earnings calls to watch this week, from the overvalued tech names to defense industry-related companies like LHX. The latter has the potential to grow this year as technology in the field continues to develop, with ARKX an aerospace ETF to watch for investors intrigued by the opportunity.
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