General Dynamics (GD)

The conflict in the Middle East and the need to replace Cold War equipment will help keep core defense spending elevated and GD's revenues strong.

Since the downturn in 2003, GD's Gulfstream jets have experienced a huge growth in revenues with new aircraft sales increasing 22% in 2006. GD's production expansion plan will help Gulfstream meet the mounting demand.

If Defense Secretary Robert Gates has his way, defense companies should get a nice bump in profits this year.

Urging Congress to give the OK to further funding for both Iraq operations and those continuing in Afghanistan “as quickly as possible,” Gates spoke before a U.S. Senate panel today along with Secretary of State Hillary Clinton.

“After Memorial Day, we will need to consider options to delay running out of funds,” he said.

The $83.4 billion request includes $75.8 billion for combat operations in the two Middle Eastern countries, and another $7.1 billion for State Department programs, including international aid.

Since Obama has declared dealing with terrorist activity in Pakistan and Afghanistan a key part of his presidency, the largely Democratic Congress who have mostly seen eye-to-eye with him so far, will likely agree to the appeal.

And as for the Republican portion, military spending is usually championed much more by the conservative side, so don’t expect much protest on their end either.

Add to that the fact that the U.S. has “huge national security interests in making sure that Pakistan is stable and that you don’t end up having a nuclear-armed militant state,” as the president put it, and you have some very good reasons for why everybody will agree on the budget and pass it as quickly as possible.

Key programs such as the Virginia Class sub, Stryker vehicle, and information technology systems meet the demands of today's battlefield and will continue to drive GD sales.

PE is below 10

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