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Established ASX-listed defence hardware manufacturer Electro Optic Systems (ASX:EOS) has jumped nearly +5% in Monday trades to $2.83/sh – bringing YTD returns to +118%.
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That’s coming into play as the company announced it had received $60 million from a “longtime customer” after a key contract officially concluded.
That’s $60M in the bank right there, today, to spend – explaining why the market’s excited about investing some money into EOS. But that, of course, comes as part of a larger thematic.
The fact that both Israel and the U.S. have attacked Iran over the last fortnight has been another boon for defence stocks in a recent string of boons.
It’s been Russia-Ukraine, the initial October 7 attacks on Israel, the resulting two year attack on Gaza, then Trump’s NATO spending announcements; then India and Pakistan fired missiles at each other, and then NATO’s agreement for its member states to boost defence spending to 5% of GDP at around the same time Israel began attacking Iran.
All in all, it’s a good time to be a defence stock.
But if an Australian publicly-listed defence stock popping off on a $60M contract sounds familiar, that’s because we saw the same thing from DroneShield (ASX:DRO) last week, from a European military customer. (Leaving investors to wonder if the deal is part of NATO spending boosts.)
While DroneShield was in the red on Monday, presumably as profit takers trim some off the top, EOS shone out on the top gainers list once again.
All of this must be rewarding for a Bell Potter analyst who wrote in 2022 that the world faced an upcoming “remilitarisation thematic” in a note that commenced coverage of Droneshield back when it was 30cps.
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As for what the aforementioned myriad of catalysts have done for defence stocks internationally, one only needs to check out Lockheed Martin and any number of defence sector ETFs.
As ever, to the appeal of traders and probably the chagrin of ethicists, there’s always money to be made in war.
EOS last traded at $2.83/sh.
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