KNOXVILLE — The National Defense Business Institute (NDBI) in the University of Tennessee, Knoxville’s College of Business Administration has published initial findings of an ongoing comprehensive analysis of the health of the aerospace and defense industry.
NDBI analysis revealed that the aerospace and defense industry may be looking at an extended dry spell for defense investment. The time between peaks in defense spending dating back to the late 1940s has been lengthening steadily for a variety of reasons, and the industry may be facing a business cycle now with defense outlays that will not peak again until sometime after 2020.
NDBI’s Aerospace and Defense Industry (ADI) market indices are easily compared with the S&P 500. With the state of the ADI in 1950 representing a baseline of 1.00, the ADI large company market index reached 91.0 in September 2010; the S&P 500 reached 67.0.
“This means that the large aerospace and defense companies, over the past 60 years, have exceeded the valuation of large companies overall as measured in the S&P 500,” said David Patterson, NDBI executive director. “This index provides a baseline measure from which the aerospace and defense future industry health can be evaluated.”
The ADI mid-sized company index, currently at 24.9, significantly underperformed both the ADI large company and the S&P 500 company indices.
According to Patterson, stock market valuations clearly favor the larger ADI companies over the midsized ADI companies.
“Although initial effects of the global economic downturn have been seen by the industry and already captured in the September 2010 figures, the full effects have yet to be realized,” he said. “We hope that our work in developing this index will provide a predictive barometer for the financial health of the industry.”
Unlike past studies of the ADI that focused on shorter time intervals or small samples of companies, the NDBI study evaluated 60 years of market and financial data across a larger, representative sample of ADI companies.
The purpose of the NDBI financial analysis is to find key economic indicators that can better predict the general health of the ADI.
The study may be found at http://ndbi.utk.edu/ or by contacting NDBI at NDBI@utk.edu.
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CONTACT:
Dave Patterson, (865-974-1692, dpatterson@utk.edu)