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Turkey Builds Site for Russian S-400: Defense Stocks in Focus

Zacks

Turkey is creating a site for a Russian missile system in spite of the United State’s warnings about buying missiles from Russia, per a CNBC report that cited a source familiar with an intelligence report covering the matter.

The intelligence report was published a month ago and comprised satellite images of a concrete missile launch facility and bunkers. The missile launch facility matches the pattern for S-400 missiles, a surface-to-air missile system developed by Almaz Central Design Bureau of Russia.

According to a news report by Interfax news agency, Russian state arms exporter Rosoboronexport said last month that the superior S-400 missile defense system will be delivered to Turkey in 2019.

Ankara’s S-400 Deal With Russia

Turkey and Russia negotiated a deal for S-400 missiles throughout 2017, with Ankara finally signing the agreement for $2.5 billion in December. Ankara’s decision to purchase the weapons from Russia has created a rift between Turkey and other North Atlantic Treaty Organization (NATO) members, as the other NATO nations do not possess defense systems to destroy the missiles.


The S-400 missile system, also known as the Triumf Mobile Multiple Anti-Aircraft Missile System, is a superior missile system developed in Russia designed to identify, track and destroy aircraft, unmanned aerial vehicles or cruise and ballistic missiles in the range of 402 kilometers. The system can engage 36 targets at the same time. S-400 missiles have been earlier sold to India and China only.

According to an infographic published by Turkish news agency Anadolu last year, the S-400 missiles are capable of shooting down American aircraft such as Lockheed Martin’s LMT F-15, F-16, F-22 Raptor, and Boeing’s BA B-1 Lancer and B-52 Stratofortress among others. In addition, the S-400 missiles do not come with a friend-or-foe identification system, which means that these can be used on any target.

Why Turkey-Russia Deal Concerns U.S.

The deal has been a source of constant distress for the United States and other NATO members over the obvious security issues. The unavailability of suitable defense systems to counter S-400 surface-to-air missiles isn’t the only concern that has the member countries on edge, Moscow’s military presence and influence in the Middle East is unsettling too.

The United States’ relation with Turkey has been turbulent for quite some time as the nations back opposition fighting groups that play a major role in the ongoing civil war in Syria. The United States backs Syrian Democratic Forces, a Kurdish and Arab group fighting against the Islamic State. Turkey, on the other hand, backs non-Kurdish factions that include the Free Syrian Army. Turkey has been critical of the U.S. support for Kurdish groups, which the country claims is responsible for its social unrest.

Tension between the two countries escalated last month, after the United States imposed financial sanctions against two top Turkish officials in retaliation to Turkey’s continued detention of American pastor Andrew Brunson.

As tensions kept mounting between the United States and Turkey, Turkish President Recep Tayyip Erdogan defended his decision to buy the missiles from Russia, citing that Washington had rejected Turkey’s requests for defense systems for years. The United States had blocked Lockheed Martin from selling fighter jets to Ankara in April.

It’s evident that Turkey’s acquisition of the advanced Russian missile system that can destroy a wide range of U.S. defenses is a concern. In addition, the growing relationship of Turkey with U.S. rival Russia is not perceived positively by the United States and other NATO members.

Therefore, the possibility of a military confrontation between the United States and Turkey has gained momentum. This could put a few U.S. defense stocks in focus.

Defense Stocks to Consider

L3 Technologies Inc. LLL provides electronic, communication and aerospace systems for use in commercial and military platforms. L3 Technologies sports a Zacks Rank #1 (Strong Buy) and its shares have gained 6.9% year to date. The company’s Zacks Consensus Estimate hasn’t changed for the current year in the last four weeks.

FLIR Systems Inc. FLIR designs, develops, manufactures and markets technologies that bring innovative solutions in thermal imaging systems, visible-light imaging systems, locator systems, measurement and diagnostic systems, and advanced threat detection systems. FLIR Systems carries a Zacks Rank #2 (Buy). The company’s shares have gained 35.3% year to date and its Zacks Consensus Estimate for current-year earnings has been revised 0.4% upward over the last 30 days.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls Industries, Inc. HII designs, builds and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard. The company also provides after-market services for military ship worldwide. Huntington sports a Zacks Rank #2 and its Zacks Consensus Estimate for earnings has been revised 1.5% upward for the current year over the past month. Its shares have gained 5.3% year to date.

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