By Mike Stone
(Reuters) - U.S. military equipment sales to foreign governments in 2024 surged 29% to a record $318.7 billion, the State Department said on Friday, as countries sought to replenish stocks sent to Ukraine and prepare for major conflicts.
The figures from the Biden administration's final year underpin expectations of stronger sales for U.S. weapons makers like Lockheed Martin (NYSE:LMT), General Dynamics (NYSE:GD) and Northrop Grumman (NYSE:NOC), whose shares are forecast to climb amid rising global instability.
During his presidential campaign, Republican Donald Trump said allies should spend more on their own defenses. Trump wants other members of NATO to spend 5% of their gross domestic product on defense – a huge increase from the current 2% goal and a level that no NATO country, including the United States, currently reaches.
Defense contractors are straining to meet the surge of demand that has mushroomed as a result of Russia's invasion of Ukraine. Global ministries of defense have been lining up to submit orders to boost their inventories, while the U.S. is seeking to replenish stockpiles of weaponry and munitions sent to Kyiv.
Arms sales and transfers are viewed as "important U.S. foreign policy tools with potential long-term implications for regional and global security," the State Department said in a statement.
Sales approved in 2024 included $23 billion worth of F-16 jets and upgrades to Turkey, $18.8 billion worth of F-15 fighter jets to Israel, and $2.5 billion worth of M1A2 Abrams tanks to Romania.
Orders approved in 2024 often go into the order backlog for U.S. weapons makers, which are expecting that orders for hundreds of thousands of artillery rounds, hundreds of Patriot missile interceptors, and a surge in orders for armored vehicles will underpin their results in coming quarters.
There are two major ways foreign governments purchase arms from U.S. companies: direct commercial sales negotiated with a company, or foreign military sales in which a government typically contacts a Defense Department official at the U.S. embassy in its capital. Both require U.S. government approval.
Direct military sales by U.S. companies rose to $200.8 billion in fiscal 2024 from $157.5 billion in fiscal 2023, while sales arranged through the U.S. government rose to $117.9 billion in 2024 from $80.9 billion the prior year.