The United States Air Force is continuing its unmanned aircraft push despite recent data that shows drones are the most accident-prone in the fleet. The rate of “mishaps” for drones is triple the average of the entire Air Force.
The concern, as reported by Bloomberg, is that these drones are being tested to fly in US Airspace, scanning the skies and borders. They are not just being used for attacks, but also defense. Although the technology is still relatively new, consider that at the same time in the life of an F-16, those planes were experiencing an accident rate of 3.89, while the Predator Drone rate is 4.86. The difference is not wildly substantial, but it is clear that a manned aircraft suffers less accidents.
Future Plans
President Obama signed legislation that aims to have drones in US airspace on a regular basis by 2015. Over the last 10 years the technology has improved substantially. Accident rates declined from 62.06 to 5.13. The Pentagon also plans to spend $3.39 billion over a year starting October 1 of this year.
The three largest defense contractors are Boeing (BA), Lockheed Martin (LMT), and Northrop Grumman (NOC). Textron (TXT) is also involved in the drone industry.
Northrop Grumman makes the most accident-prone aircraft, with the partnership of Boeing and Textron in second place.
Business Section: Investing Ideas
If drones are really the future of warfare, it may be a prudent to consider investing in the companies that build them.
Creating drones reliable enough to constantly roam the airspace above the US by 2015 will cost a pretty penny, but it appears the government is willing to spend it, based on the nearly $3.4 billion investment Uncle Sam is making in just the next year alone. How do you think defense stocks will react?
Use the Compar-O-Matic to analyze the Market Cap of the companies involved:
1. Boeing Co. (BA, Earnings, Analysts, Financials): Engages in the design, development, manufacture, sale, and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide. Market cap at $53.82B, most recent closing price at $71.85.
2. Northrop Grumman Corporation (NOC, Earnings, Analysts, Financials): Provides products, services, and solutions in aerospace, electronics, information systems, shipbuilding, and technical service sectors. Market cap at $15.22B, most recent closing price at $60.53.
3. Lockheed Martin Corporation (LMT, Earnings, Analysts, Financials): Engages in the research, design, development, manufacture, integration, operation, and sustainment of advanced technology systems and products in the areas of defense, space, intelligence, homeland security, and government information technology in the United States and internationally. Market cap at $27.05B, most recent closing price at $83.33.
4. Textron Inc. (TXT, Earnings, Analysts, Financials): Operates in the aircraft, defense, automobile, industrial, and finance businesses worldwide. Market cap at $6.81B, most recent closing price at $24.29.
(Written by Ryan Horch)
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