Ahead of the Bell: Defense Budget

Details of President Barack Obama's $664 billion defense budget did little to shake Wall Street's overall confidence in the strength of the industry.

On Thursday, Obama sent to Congress details of his proposed $664 billion Pentagon spending plan for the budget year starting in October. It includes $534 billion for base defense programs and $130 billion for overseas operations, including the wars he's ramping down in Iraq and ramping up in Afghanistan.

Even with some major cuts of weapon systems, like Lockheed Martin Corp.'s F-22 fighter jet and the new White House helicopter program, Morgan Keegan analyst Brian Ruttenbur said he remains optimistic about the outlook of the U.S. defense industry.

"Despite the impending withdrawal from Iraq and budgetary constraints, a significant global threat environment remains and we do not believe U.S. military spending is threatened by any significant declines," Ruttenbur wrote in a note to clients.

The analyst anticipates the core defense budget will grow at a solid, single digit pace over the next several years, and increased spending on Afghanistan will help partially offset anticipated declines in the Pentagon's war budget.

Ruttenbur said he expects demand for advanced defense electronics like cybersecurity and unmanned aerial vehicles to continue to grow over the next several years.