United Tech tops defence aerospace companies in market cap

The US Standard & Poor's Aerospace and Defense index fell 37 per cent in 2008 ending a five-year streak of gains. This year it is up about 8 per cent, as compared to a 4 per cent gain for the S&P 500 Index.

Equity research firms Goldman Sachs and Macquarie Research have recently expressed caution on defence stocks taking into account expected cuts in defence spending - both in Europe and the United States.

Both firms have raised ratings on companies that have a strong commercial aerospace presence, such as Boeing, Airbus parent EADS and Goodrich Corp, as compared to those with a pure defence play such as Northrop Grumman Corp, BAE Systems and Finmeccanica of Italy.

Industry experts point out that the US budget request for fiscal 2011 is likely to have deeper cuts in defence spending than the current 2010 budget, which carries a lot of the baggage from the past.

Analysts note that markets reflect this sentiment, with commercial aerospace stocks outperforming defence stocks in 2009. While Boeing has gained 21 per cent and Goodrich 44 per cent, defence giant Lockheed Martin has gained a mere 2.1 per cent and Northrop Grumman is up 6 per cent.

European giant, BAE, which trades in London, is down 13 per cent.

The world's leading defence contractors and their market capitalization, in US dollars.