U.S. elections have an outsized effect on the stock market. The results are always catalysts, and the policies supported by the candidate who ends up winning the presidency, as well as the final composition of the House of Representatives, tend to favor some sectors more so than others.
However, mounting tensions with China, increasingly considered a near-peer in terms of defense, as well as current tensions in the Middle East, have led both parties and their candidates to adopt largely similar stances on defense.
This hasn’t gone unnoticed — the S&P Aerospace & Defense Select Industry Index is up 17.37% year-to-date (YTD), and Wall Street is still quite bullish.
Picks for you
On October 10, Citigroup (NYSE: C) analysts released a slew of price target updates. Defense dominated — with 8 of the 10 updates being for defense stocks.
Let’s take a closer look at Citi’s picks.
Science Applications International Corporation (NASDAQ: SAIC)
Citigroup equity research analyst and managing director Jason Gursky reiterated a ‘Buy’ rating for SAIC, raising his price target from $160 to $176. Should the stock reach that mark, it will have posted a 23.3% gain relative to its current price of $142.74.
SAIC shares are up 14.57% YTD. The company’s next earnings call is due December 2.
The company has secured lucrative contracts with the military and NASA, as well as a notable $229 million deal for the modernization of NORAD IT resources announced on September 18.
Citi is not the only firm bullish on SAIC — on October 11, Wells Fargo increased its price target to $157 from $122, while JPMorgan upgraded the stock from ‘Neutral’ to ‘Overweight’, setting a price target of $170.
L3Harris Technologies (NYSE: LHX)
Citigroup aerospace and defense researcher Jonathan Raviv raised his price target from $268 to $291 — citing rising defense budgets in Europe and additional spending bills in the U.S.
LHX is trading for $242.35 at press time — shares could see a 20.7% rally if they reach the price target. The company’s stock price has increased by 15.53% YTD — the business will host its next earnings call on October 24.
Over the course of 2024 LHX has managed to secure a $587 million Navy contract for electronic warfare systems (EWS), as well as a 5-year ‘indefinite delivery, indefinite quantity’ contract for advanced artillery shell fuzes that could be worth as much as $871 million. The company also happens to be one of noted Republican Senator Lindsey Graham’s biggest political donors.
The bullish sentiment was echoed by Wolfe Research, which recently set a $300 price target, as well as Barclays, with a more modest forecast of $265 — both firms upgraded the stock to ‘Overweight’.
General Dynamics (NYSE: GD)
A ‘Buy’ rating was also maintained on General Dynamics. Citi increased the price target from $331 to $354.
At the time of writing, GD shares are trading at $296.09, bringing YTD returns up to 14.50%. The forecast from Jason Gursky sees a 19.57% upside for the stock. GD will share its next earnings report on October 23.
General Dynamics covers a broad spectrum when it comes to the defense industry — the business recently secured a $491.6 million contract with the Space Development Agency, and a $1.3 billion contract for the modification of Virginia-class submarines.
Leidos Holdings (NYSE: LDOS)
Citi raised its price target for LDOS from $169 to $194, maintaining a prior ‘Buy’ rating. Currently trading at $166.27, Leidos shares have gained 53.96% in 2024, with a forecasted upside of 16.67%. The company’s next earnings report is set for October 29.
In terms of recent defense contracts, the IT business was awarded $7.9 billion to procure hardware.
Lockheed Martin (NYSE: LMT)
Gursky maintained a ‘Buy’ rating for LMT, increasing his price target from $570 to $700. Lockheed shares are currently trading at $601.46 — the stock is up 31.87% YTD, and the next earnings call will occur on October 22.
Perhaps most surprisingly, peers and competitors Northrop Grumman (NYSE: NOC) and Raytheon (NYSE: RTX) received neutral outlooks.
There is a notable difference when it comes to price forecasts — NOC and RTX saw price targets rise from $521 to $587 and $122 to $132, which would represent an 11.37% and 7.4% upside respectively.
In contrast, Citi reiterated a ‘Buy’ rating for Lockheed, raising their price target from $570 to $700, which would amount to a 17.16% increase from current LMT share prices.
Lockheed is the largest U.S. defense contractor and managed to secure a $5 billion contract from the U.S. Army to produce and maintain F-35 Lightning II jets on August 28.
