October 24, 2012–Elbit Systems Ltd. (ESLT), Israel’s largest non-government defense company, is beating global peers after sinking to a six-year low in August on prospects the developer of unmanned aircraft and night vision systems will receive more contracts as violence in the Middle East escalates.

The company, which depends on its home country for 25 percent of revenue, has rallied 22 percent since Aug. 28, compared with a 0.2 percent advance in the Standard & Poor’s 500 Aerospace & Defense Index and 7.6 percent increase for Israel’s benchmark TA-25 Index. The gains pushed valuations to 9.8 times estimated profits from 7.4, still a 23 percent discount to the average multiple for companies on the S&P Defense Index.

Increasing orders from the Israeli government will help Haifa-based Elbit compensate for falling revenue in the U.S. and Europe amid growing security threats on Israel’s borders as well as heightening tensions with Iran and the possibility of an Israeli strike, according to Citigroup Inc. Israeli Prime Minister Benjamin Netanyahu cited “security and economic” upheavals as his reason for calling early elections on Oct. 9.

“Tensions with Iran and the Arab spring are causing a rise in Israel’s defense budget and Elbit is well positioned to benefit from this,” Michael Klahr, a Tel Aviv-based analyst at Citigroup who has been recommending investors buy shares since May, said by phone on Oct. 10.“Even after the recent move, I see an upside to the shares.”…Read More>>

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