A Fistful Of Coverage: 5 Outperform Ratings On 5 Defense Stocks

Baird analysts initiated bullish coverage on five defense stocks Thursday.

“We believe the Fiscal Year 2016 funding will mark the first year of a long-term upturn for budgets and expect contractor backlogs to expand over the next several years,” said analyst Peter Arment.

The analyst specified Raytheon Company RTN, Northrop Grumman Corporation NOC and L-3 Communications Holdings, Inc. LLL as top defense large-cap picks.

Related Link: Northrop Grumman: Best Growth You Can Get In Large-Cap Defense

A Few Specifics

Raytheon: Initiated at Outperform with $170 price target (23 percent upside).

• The analyst cited an overall favorable outlook for defense programs, specifically Raytheon’s highly leveraged missile defense and precision weaponry program.

Lockheed Martin Corporation LMT: Initiated at Outperform with a $284 price target (20 percent upside).

• The analyst cited product portfolio covering all key areas and benefit from continued aeronautic, missile and fire control and Mission Systems segment growth.

L-3 Communications: Initiated at Outperform with a $184 price target (21 percent upside).

• The analyst cited rising dense budgets, a solid portfolio, improved margins and a shareholder friendly management as factors that should continue to drive share prices.

Northrop Grumman: Initiated at Outperform with a $260 price target (45 percent upside).

• The analyst cited expecting accelerated revenue from ramp in key platforms: F-35 ramp, Triton UAV, E-2D and B-21 bomber.

Mercury Systems Inc MRCY: Initiated with an Outperform rating with a $30 price target (15.5 percent upside).

• The analyst cited longer-term upside and $1 billion market-cap path based on organic growth and recent acquisitions from Microsemi Corporation MSCC.

At Last Check ...

• L-3 Communications was up 1.29 percent at $152.39.
• Lockheed Martin was down 0.68 percent at $234.97.
• Mercury was down 3.02 percent at $24.53.
• Northrop Grumman was up 0.85 percent at $214.29.
• Raytheon was up 0.78 percent at $138.20.

Full ratings data available on Benzinga Pro.