US Defense: President’s Buyback Comment Roils Share Prices
We have not changed our fair value estimates for any defense firms.
In afternoon trading on Jan. 7, after reports that President Donald Trump suggested he would prohibit US defense contractors’ dividends and stock repurchases, shares of such companies declined by as much as 5%.
Bears say: As on Oct. 15, 2025, when Treasury Secretary Scott Bessent made similar remarks, investors seem to have discounted the shares of US defense contractors based on an estimation that the US government can and will restrict their share repurchases.
Key stats: Together the top seven US defense contractors have repurchased $128 billion in stock over the last 10 years, representing about 2.5% of their average market capitalization and a similar proportion of US defense outlays for research, development, procurement, and maintenance during that period.
- Boeing ceased share repurchases in 2019, and it effectively reversed all of its buybacks since mid-2017 when it issued $18 billion in new shares to raise capital in 2024.
The bottom line: While share repurchases inform our evaluation of companies’ capital allocation policies, they do not impact our fair value estimates, which reflect the present value of our forecast free cash flow.
- In our estimation, US defense contractors remain mostly fairly valued after their selloff, ranging from 93% of fair value for Boeing to RTX’s 110%.
Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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