Let's start our study with the world's largest defense contractor in key supplier to the U.S. and NATO militaries. The company focuses on four different market segments: aeronautical systems sales (39.9% of sales) with sales of military and civilian aircraft to government agencies, electronic systems (25% of sales), missile sales and fire control systems (17.6% of sales) and finally, space (17.5% of sales), which includes the development of commercial and government satellites.
Lockheed Martin makes more than 70% of its sales in the United States - the majority of its business is based on the needs of the US Department of Defense. In fact, the U.S. defense industry has now become an oligopoly, outpacing its four domestic counterparts - General Dynamics, Boeing, Raytheon and Northrop - in terms of revenue. The company has grown from $47 billion to $67 billion over the past decade, a CAGR of 3.6%. Lockheed also has higher margins than its competitors, supported by operating income that doubled and earnings per share that tripled from $7.5 to $23. At the same time, the group generated $45 billion in free cash flow, all of which was returned to shareholders via equal amounts of buybacks and dividends.
Finally, despite a constant EBITDA of around $10 billion and an average price/earnings ratio of 17 times, investors may be interested in the current momentum and configuration of these shares. Indeed, geopolitical tensions are rising - with more than 50 open conflicts around the world - such as the war in Ukraine and the visit to Taiwan by the Speaker of the U.S. House of Representatives, reigniting tensions with China. And, despite criticism, the F-35 - in direct competition with the Rafale from Dassault and Thales - is seeing an influx of orders and mega export contracts, guaranteeing decades of business related to spare parts, upgrades, weapons systems and maintenance.
The American company with 1.7 billion products sold worldwide per day distributes its products in more than 200 countries, through the world's biggest sporting events and an omnipresence in the media. It has been highly profitable for years, with an EBITDA of around 13 billion - similar to Pepsi, its main competitor. Coca Cola aims to be responsible and uses non-polluting resources, which allows it to control its emissions. It has an excellent ESG of A-, as well as EBITDA, profitability and analyst coverage. Coca Cola is the world's leading soda company and its flagship product is simply the company's namesake beverage, which outsells other large group sodas such as Pepsi or Dr Pepper.
Coke's ecosystem translates into a wider range of products that are always cheaper and of better quality, thus improving the customer experience. To maintain its status as a major player in its sector, the company is going on ambitious projects such as setting up operations in emerging markets and buying out strategic companies. At the same time, the group is investing heavily in its supply chain and production to optimize the physical network and reduce costs. As a result, the group is expected to see its earnings per share increase by 26.82% between 2020 and 2022 - boosting investor confidence and consolidating the current strong balance sheet with steadily increasing net cash and margins. The company can also benefit from a stable P/E of around 26 and an ROE of around 47%.
Since 1970 - despite an initial IPO in 1919 - the largest soda distributor in the U.S. has seen its share price rise by 7,400%, corresponding to a CAGR of 8.63% and representing the largest increase in its sector. This increase allows the company to see its current share price at $63.8, in line with its competitors' prices, but with a more interesting growth opportunity. The company is taking advantage of its current leadership position to expand its business and gain more market share. However, despite the fact that the group is positioned in the healthier food sector, changes in consumer behavior could eventually weigh on the results. Especially since water is an increasingly scarce resource whose price could rise significantly, including an increase in the group's product range.
Johnson & Johnson is positioned as one of the leaders in its sector with a complete range of services thanks to a century of know-how and a strong history, which convinces investors and creditors that the business model is proven. Since its IPO, the group has been able to finance numerous acquisitions, including Synthes in 2012 and Auris Health in 2020. Thanks to their extensive research and development, the company has already led some of the most important innovations of the 21st century. The company's results and very strong balance sheet make it easy for investors to understand its results. With its large capitalization, the company offers significant visibility on its future results.
Despite the covid-19 pandemic, Johnson & Johnson's EBITDA grew by 34.96% to $36 634 millions between 2020 and 2021. Especially since with net cash expected to be up 116% in 2023 and net debt has been lowered by 78.74% in 2021, there is no doubt that the company will be able to use these resources to further position itself. The pandemic has not disrupted either the cash-flow or the dynamics of the company, which has remained at the same growth rate. Despite the current macroeconomic turmoil and rising interest rates, the company's balance sheet policy is to reduce its debt and leverage. Between 2012 and 2021, Johnson & Johnson’s operating margin increased by 71.7% - the highest in the pharmaceutical sector. Net income grew 92.37% over the same period, almost 2 times that of Pfizer (50.85%).
Johnson & Johnson is – without any doubt - the leader in its sector, with a market capitalization of nearly $459 million, almost twice that of its main competitor. At the same time, the company invests massively in R&D (16% of net sales), allowing for sustained growth. It is without hesitation that it has been paying increasing dividends for decades, without interruption, to reach $4.21/share in 2021 - 5% more than in 2020. And the company is stabilizing its yield around 2.5%, which is good. However, the group faces many competitors while its growth is mainly due to external acquisitions and development of new drugs, treatments and so on - up to 10 years of research.
J.P. Morgan is the world's largest American bank. It is organized around four business segments: investment banking and capital markets (40.2% of sales) with advice on mergers and acquisitions and restructuring, interventions in the equity markets... retail banking (38.9% of sales) with the sale of traditional and specialized financial services... asset management (13.2% of sales) and commercial banking (7.7% of sales) for an average annual return of 11.71% over the past nine years. The share price has experienced various trend cycles and has been in an upward cycle since 2012, despite the Covid crisis and recession fears causing the share price to fall.
The company can count on strong operating profits with growth expectations for the coming years, with the dividend per share rising for the past few years. J.P. Morgan will strengthen its market position and expand access to primary care, especially since its profitability is among the best in the market and its analyst coverage is among the most influential.
J.P. Morgan's stock should move up comfortably in the coming months, especially since the big money investment banks and analysts have announced price targets of $165. Its capitalization is struggling to grow, but is stabilizing around $330 billion, while its revenue is rising and its P/E is falling to 10 for 2022, higher than Goldman Sachs. At the same time, its yield is expected to rise nearly 50% for 2022 to 3.59% as is its dividend at $4.04/share.
The company posted a strong EBIT at $50 billion, as well as a net margin of 38.2% for 2021. The development of AI allows companies to grow through the use of all available resources and optimize their uses as shown by the acquisition last March of Global Shares - a leading provider of cloud-based share plan management software.
AbbVie Inc. specializes in the research and development of therapeutic drugs. The products are intended for the treatment of nine different diseases. The company's turnover is mainly concentrated in the USA (77.4%). Like many companies in the medical sector, Abbvie's main focus is on research & development of new drugs, representing significant investments in capital time & money. However, the company can count on various acquisitions such as Syndesi Therapeutics in 2022, strengthening their position in neuroscience.
Among its competitors, the company has the largest pharmaceutical companies in the world, which does not prevent its capitalization from having almost doubled to $245 billion in the space of four years. As a result, it boasts a yield of more than 4%, coupled with a dividend of more than $5.31/share - one of the highest in its sector. However, the company has significant debt - related to these numerous acquisitions - amounting to $54 billion. But they should reduce in the coming years. Especially since the company's free cash-flow is constantly increasing, and will amount to almost 22 billion in 2021.
The healthcare industry is one of the most important industries where investments and growth perspectives are the most promising. General health issues, global pandemics and the spread of viruses are among the major events that are driving this industry to perform better. Net margins - up 169% in the space of two years - are also enormous, as patents allow companies to be the sole distributor of a product for several years, giving them a monopoly position on it. The group's EBITDA is steadily increasing (316%) over the period 2012-2021.