Market Overview

3 Stocks To Buy In An Increased Global Threat Environment

3 Stocks To Buy In An Increased Global Threat Environment
Related CACI
Earnings Scheduled For October 31, 2018
Benzinga's Top Upgrades, Downgrades For September 25, 2018
Related LDOS
Jim Cramer Shares Thoughts On Skyworks Solutions, Cypress Semiconductor, More
A Peek Into The Markets: US Stock Futures Down Ahead Of Manufacturing Data
EAA Announces November 2018 Portfolio (Seeking Alpha)

In the government agencies sector, Wells Fargo upgraded CACI International Inc (NYSE: CACI), Leidos Holdings, Inc. (NYSE: LDOS) and Science Applications International Corp (NYSE: SAIC) from Market Perform to Outperform on Wednesday, with a price target of $158, $69 and $80 respectively.

Analyst Ed Caso is bullish because of improving fundamentals — especially funding levels and pricing, he said. (See Caso's track record here.)

A rising global threat environment could have a positive impact on these stocks, Caso said. The analyst projects an increase in national security funding above the current caps set under the Budget Control Act of 2011. There are also expectations of stronger-than-normal federal government fourth quarter book-to-bill.

The sector could benefit from a reduction in the U.S. corporate tax rate, because most are near the margin tax rate, Caso said. A 5-point reduction in the federal corporate rate would increase EPS by 8 percent, while a 10-point decrease would increase EPS by 16 percent, according to Wells Fargo.

The sector has a reasonable valuation according to free cash flow yield, but it is not inexpensive relative to a long-term view of enterprise-value-to-EBITDA, Caso said. The valuation has eased since the election, the analyst said.

The sector is lagging behind the aerospace sector, the defense sector and the market as a whole, Caso said; it has a defensive nature, which could be important in case the market pulls back.

Related Links: 

As U.S. Budget Crisis Looms (Again), 7 Stocks Affected By Government Shutdowns 

The Lucky Beneficiaries Of Tax Day 

Latest Ratings for CACI

Nov 2018Wells FargoMaintainsOutperformOutperform
Nov 2018CitigroupMaintainsBuyBuy
Sep 2018JefferiesDowngradesBuyHold

View More Analyst Ratings for CACI
View the Latest Analyst Ratings

Posted-In: Ed Caso Wells FargoAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (CACI + LDOS)

View Comments and Join the Discussion!

Latest Ratings

CPAImperial CapitalDowngrades68.0
PRMWImperial CapitalInitiates Coverage On18.0
TGTKeyBancInitiates Coverage On110.0
QCOMMorgan StanleyUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Wall Street Remains Sidelined On Chipotle After Disappointing Q3

Albemarle, Bank Of America, And Other Stocks On Fast Money Traders' Radar