Monday, December 13, 2021

An International Equity holding: Elbit Systems Ltd. (ESLT, $155.12): “Elbit’s UK Surprise” By: Zach Turbett, AIM Student at Marquette University

 Elbit Systems Ltd. (ESLT, $155.12): “Elbit’s UK Surprise”

By: Zach Turbett, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


  • Elbit Systems Ltd. (NASDAQ: ESLT) manufactures and supplies a comprehensive portfolio consisting of airborne, land and naval systems and products for defense, homeland security and commercial applications.
  • For Q2 2021, ESLT reported an EPS of $2.30 compared to its $2.03 EPS last year, resulting in an 13.3% increase
  • ESLT UK subsidiary was awarded a $100 million contract by Babcock International Group Plc.
  • The expansion of the company into North Charleston, South Carolina brings many new jobs to the city
  • October 25, 2021, ESLT announced the start of a new project aimed at the establishment of power generation and energy storage units at facilities in Israel

Key points: Elbit Systems Ltd. remains ‘in play’. While ESLT saw little movement during Q1 and Q2, the company began to pick up speed in the beginning of the third quarter. Currently, ESLT stands at $155.10 per share, which is approximately up 13% from its addition to the fund. For Q2 of 2021, ESLT reported a $0.27 increase in EPS (originally $2.03) representing a 13.3% increase. Also, second quarter revenues were up $1.3 billion (21% YOY), in which management stated to be organic.

In more recent news, Elbit Systems’ UK subsidiary was awarded a $100 million contract from Babcock International Group. Under the 13-year contract, ESLT will be provided the Royal Navy new Electronic Warfare (EW) capabilities ranging from fully digital full-spectrum Radar Electronic Support Measures (RESM) and EW Command and Control (EWC2) systems. Management has expressed its gratitude towards the Royal Navy in this 13-year plan.

In addition to favorable impacts of the contract, ESLT will be adding a 5th  facility in the U.S located in North Charleston, South Carolina. According to the management team, the facility is expected to be operational by fall 2022. With the opening of the facility, ESLT will be able to increase their engineering and manufacturing capabilities in the U.S, which ultimately will strengthen Americas military. Moreover, the project will have the ability to add hundreds of new jobs to the Charleston county.

With the successful growth into new parts of the world, ESLT is also looking to upgrade its older facilities in Israel with power generation and energy storage units. These additions to the facilities will not only lower emission energy sources, but also improve its energy consumption. These steps taken by the company will expand its efforts in reducing its carbon footprint.

What has the stock done lately?

Since ESLT released news of its contract with the Royal Navy, the stocks shares are up roughly 4%. Having seen little movement in Q1 and Q2, this is just the catalyst ESLT needed in order to give it some life. In fact, the company’s share price is nearing all-time highs at $166.91.

Past Year Performance: Shares of Elbit Systems Ltd. have been trading within a range of $113.89 and $166.77 over the last 52-week period. In terms of YTD, ESLT grew 19.3% with a 52-week beta of 0.71. With momentum heading in the right direction, ESLT may continue to grow until it reaches highs since Q4 2019.

Source: FactSet

My Takeaway

Elbit System’s success in landing a $100 million contract with Babcock International Group has driven its price share and exceeded shareholders expectations. The announcement of the company’s expansion into North Charleston, South Carolina great news as it aligns with the company’s continual growth strategy. Also, with the addition of new energy generation and power storage units in older facilities in Israel, ESLT is in a perfect position to capitalize and grow as it its nearing its all-time high of $166.77. It is recommended that the AIM international fund continue to hold Elbit Systems.

Source: FactSet