NEW YORK ( TheStreet) -- The Boeing ( BA), Orbital Sciences ( ORB), American Science and Engineering ( ASEI), General Dynamics ( GD) and FLIR Systems ( FLIR) received buy ratings in the range of 56%-100%. In addition, these stocks have upside potential of 8%-28%, based on consensus estimates of 12-month price targets.

The U.S. defense budget for fiscal 2012 is $553 billion, up $22 billion from 2010. The Pentagon is seeking a $78 billion cut in defense spending over the next five years. Overseas war funding could moderate, going ahead.

We have identified five defense-related stocks that could appreciate significantly over the next one year. These stocks churned an average 13% return during the past one year and are trading 11 to 21 times their estimated 2011 earnings.
5. FLIR Systems ( FLIR) designs, manufactures and markets thermal imaging systems.

Net income from continuing operations was $70.3 million for 2010 final quarter, compared with net income of $60.3 million during the same quarter a year-ago. Revenue was $434 million, up 39% from fourth quarter 2009. Operating income was $101 million, up 12% from the fourth quarter of 2009. The company closed its acquisition of ICx Technologies during the fourth quarter, and the segment contributed $46 million revenue and $2 million operating income.

FLIR derives about one-third of its revenue from the U.S. and plans to diversify its revenue sources by gaining traction in other geographies like Saudi Arabia. The stock is trading at 19 times its 2011 estimated earnings.

4. American Science and Engineering ( ASEI) is a U.S.-based supplier of X-ray inspection systems and other detection technologies for global customers.

The company reported revenue of $77 million for 2010 third quarter, up 40% from the prior year's $55 million. Net income reported for the quarter was around $12 million, compared with $6 million for the same quarter last year.

Reviewing the performance, Anthony Fabiano, ASEI president and CEO, said, "Our solid performance continues to been driven by strong contributions from our 'big three' business areas -- Cargo Systems, Z Backscatter(TM) Systems, and Field Service. Our bookings in the quarter were marked by breakthrough strategic orders from key customers. These included $34.4 million in orders placed under the $67 million U.S. government IDIQ contract for Z Portal(R) systems that will be deployed on multiple U.S. border crossings."

The stock is trading at 19.1 times its estimated 2011 earnings and has 57% analysts' buy ratings.

3. General Dynamics ( GD) is a prime contractor of defense-related products and services, addressing segments like aerospace, marine and combat systems, serving both domestic and international customers.

The company reported 2010 fourth quarter earnings of $729 million, surpassing $618 million recorded in the same quarter last year. Full-year 2010 earnings stood at $2.6 billion, compared to $2.4 billion for 2009 fiscal. Fourth quarter and full-year 2010 revenue reported was $8.6 billion and $32.5 billion, up 9% and 1.5%, respectively.

Operating margins advanced 12.5% for the fourth quarter from 12% in the prior year quarter, largely attributable to 250 bps improvement in the aerospace segment.

Total backlog was $59.6 billion and management indicates 2011 earnings per share of $7-$7.1 per share, compared to $6.88 per share in 2010. The stock is trading at 10.9 times its estimated 2011 earnings.

2. Boeing ( BA) designs and manufactures commercial and military aircraft.

For the fourth quarter, revenue and net income declined 8% each to $16.55 billion and $1.2 billion, respectively. Metrics for the defense, space, and security (DSS) segment, which accounts for nearly 50% of Boeing's revenue, were superior when compared to overall operations. The segment's revenue and net income were $8.2 billion and $816 million, declining 4% and 2%, respectively. However, the company's operating margins were better at 10%, compared to 9.7% in the prior year's final quarter.

Backlog at DSS is $65 billion at the end of the fourth quarter - double the expected 2011 revenue, management indicates. Revenue guidance for 2011 is between $31.5 billion and $33 billion with operating margins between 8.5% and 9%. The stock trades at 17 times its estimated 2011 earnings.

1. Orbital Sciences ( ORB) manufactures rockets and space systems for commercial, military and civil government customers.

Revenue for 2010 fourth quarter amplified 23% year-over-year to $346.1 million, while operating income was $24.1 million, up 64% compared to same quarter in 2009.

The company received $655 million in new, firm and option contract bookings during the fourth quarter and around $50 million of option exercises under existing contracts. Backlog at the end of December was approximately $2 billion and its total backlog was approximately $4.57 billion.

Data from Bloomberg has all the ten analysts covering the stock recommending a buy. Analysts are positive on the stock and imply an upside of 28% over the next one year. The stock is trading at 20.7 times its estimated 2011 earnings.

>To see these stocks in action, visit the 5 Defense Stocks With Top Buy Ratings portfolio on Stockpickr.

If you liked this article you might like

24 Stocks Hedge Funds Are Loving Right Now

24 Stocks Hedge Funds Are Loving Right Now

Jim Cramer: You Have to Decide If You Want to Profit From This Moment

Jim Cramer: You Have to Decide If You Want to Profit From This Moment

Will Boeing Ever Come In for a Landing?

Will Boeing Ever Come In for a Landing?

General Electric Is One Mega-Cap Stock You Must Still Avoid

General Electric Is One Mega-Cap Stock You Must Still Avoid

Dow Jumps Over 300 Points, Posting Its Fifth Straight Day of Gains

Dow Jumps Over 300 Points, Posting Its Fifth Straight Day of Gains