Ahead of the Bell: Defense spending

Plans to send more U.S. troops to Afghanistan will likely lead to higher military spending and may benefit several defense contractors, an analyst said Tuesday.

The rising level of military activity "may point to a ceiling on the defense budget that is too low," analyst Howard A. Rubel of Jefferies and Co. Inc. said in a note to investors.

President Barack Obama approved 17,000 additional combat forces for Afghanistan this year, plus 4,000 trainers and other noncombat troops. By year's end, the United States will have more than 68,000 troops in Afghanistan, or about double the number of soldiers at the end of George W. Bush's presidency but still far fewer than the 130,000 still in Iraq.

"While bullets or bayonets do not end wars, it seems likely that more of them, as well as rockets, radios, and helicopters, will be required," Rubel said.

He said the prospects "are decent" that there will be more orders for ammunition from Alliant Techsystems Inc. and General Dynamics Corp., unmanned aircraft from AeroVironment Inc., precision munitions from Lockheed Martin Corp. and Raytheon Co., training support from L-3 Communications Inc. and helicopters manufactured by Boeing Co. and United Technologies Corp.

Obama last week 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.

Rubel said that if the war in Afghanistan does not produce results, "spending is not going to decline, disrupting a political calculus in Washington."