Analysts Say Iraq Move to Have Little Impact On U.S. Defense Firms, but Some See Gains
LOS ANGELES -- As unseemly as it sounds, arms makers know that a little war can be good for business.</br></br>After Iraq crossed the border into Kuwait late last week, some defense stocks climbed 10%, even as the rest of the market plunged on fears that higher oil prices would accelerate inflation and, at the same time, prompt a full-blown recession.</br></br>In the past two days, the run-up has faltered a bit. But the question remains: Just how much have the bellicose Iraqis bolstered the fortunes of U.S. military suppliers?</br></br>All in all, many securities analysts insist, very little has changed during the past week to actually reverse the deterioration of earnings and balance sheets across the industry. "The rally has been driven by emotions, not fundamentals," says defense stock analyst Michael Rosen of Smith Barney, Harris Upham.</br></br>"None of these companies are going to recover overnight," adds Howard Rubel, aerospace analyst at Cyrus J. Lawrence. He says that difficult-to-meet Pentagon contracting terms and the melting of Cold War tensions will continue to take their toll on most weapons producers and defense stocks, as they have for the past year.