The technical term for drones is Unmanned Aerial Vehicles (UAV). The technology started in Israel in the 1973 following the Arab/Israeli War. Israel had suffered heavy losses to its aircraft and was searching for a way to monitor their frontier. The technology was adopted by the US military and now is used as a tool for hunting down and destroying terrorists. Drones can fly accurately over long distances and provide better intelligence gathering on the ground.
To illustrate the rapid growth of drones, 10 years ago the US had 50 drones in service. Now that number is well over 7,000. Drone technology is now part the $51 billion US Defense Budget. At the present time, the US controls 77% of the drone market. It also controls 64% of the procurement for the next decade. US firms control 50% of the market by value with an expected growth of 10% during the next decade.
Drone technology is spreading quickly from the military to the private sector. The Drone Act under the FAA has a deadline of 2015 to integrate drone flights into domestic air travel. It is expected that domestic drone flights will increase from the present 300 to 30,000 by 2020. By 2025, the drone market is expected to balloon to $82.1 billion.
Google’s Airware program is already using small drones to monitor Kenyan wildlife, to identify poachers on the ground. Fed EX is actively considering the use of drones to reduce their huge $10 billion quarterly operating expenses. Drones are used in film making to photograph wide area landscapes that otherwise could not be captured.
At present, the largest expenditures are for the military. Here are some of the leaders in this sector:
· Boeing (BA) Recent Price $133.03. 52 Week High/Low $133.50/$69.30 EPS is 6.48. PE Ratio is 20.14. Dividend $1.94 (Yield 1.49%) Market Cap is $100.36 B.
Their drone is capable of staying airborne for days.
· Lockheed Martin (LMT) Recent Price $134.55 52 Week High/Low is $136.84/$85.88. EPS is 9.47. PE Ratio is 14.08 Dividend $4.60 (Yield 3.45%) Market Cap is $43.18 B. Lockheed produces the Stalker drone.
· Northrop Grumman (NOC) Recent Price $108.12 52 Week High/Low is $109.41/$62.80. EPS is 8.02. PE Ratio is 13.41 Dividend is $2.44 (Yield 2.27%) Market Cap is $24.88 B.
Northrop is active in the drone export market. They have recently sold South Korea $1.2 billion in drones. They produce the Global Hawk drone.
· General Dynamics (GD) Recent Price is $87.15. 52 Week High/Low is $89.41/$61.70. EPS is 6.66 PE Ratio is 13.01 Dividend is $2.24 (Yield $2.59%) Market Cap is $30.49 B.
General Dynamics is active in the Congressional Unmanned Systems Caucus.
· Science Application Internatio (SAIC) Recent Price $35.44 52 Week High/Low is $37.50/$31.17. Dividend $1.12 (Yield $3.18%) Market Cap is $1.73 B.
Science Application Internatio is pursuing development of underwater drones that can detect ultra quiet submarines.
· Textron (TXT) Recent Price is $29.00 52 Week High/Low is $31.30/$22.84 EPS is 1.71 PE ration in 16.84 Dividend is $.08 (Yield .28%) Market Cap is $8.13 B.
Textron is also spending $61 million on underwater drones.
This discussion is neither a recommendation to buy not to sell these securities. You must always do your own diligent research.