By Andrea Shalal-Esa
WASHINGTON (Reuters) - Defense spending is likely to remain strong for the foreseeable future, as the U.S. military scrambles to replace equipment worn out in Iraq, although high growth rates are unlikely to be sustained.
In addition, the Pentagon is gearing up to award several huge multibillion-dollar contracts next year for new refueling aircraft, helicopters and surveillance systems.
"It looks like the worse-case scenario is an extremely healthy plateau for the next four years," said Richard Aboulafia, an analyst with Virginia-based Teal Group. "So much equipment has been lost or worn out that spending needs to stay at or above these levels."
Top industry executives and military officials will discuss the sector's outlook at the annual Reuters Aerospace and Defense Summit in Washington, starting on Monday.
Leading defense contractors have benefited from record spending spurred by the wars in Iraq and Afghanistan, and a huge push by the United States and other countries to beef up homeland defense, border security and intelligence work.
Top-tier defense contractors Northrop Grumman Corp (NOC.N: Quote, Profile, Research, Stock Buzz), General Dynamics Corp (GD.N: Quote, Profile, Research, Stock Buzz) and Lockheed Martin Corp (LMT.N: Quote, Profile, Research, Stock Buzz) (LMT.N: Quote, Profile, Research, Stock Buzz) all reported higher profits in the third quarter, and raised their financial forecasts.
Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz) also posted higher income, but said profits were off in its defense unit, while Raytheon Co's (RTN.N: Quote, Profile, Research, Stock Buzz) earnings were hit by a one-time charge related to the sale of its private jet chartering unit.
Analysts have expected defense spending to level off for years, but lawmakers have kept the boom going longer than expected by adding funding to better protect U.S. troops. Continued...
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