Al Root
Nervous defense investors aren't sure what to make of shifting priorities under the Trump administration. There are opportunities for companies with the right portfolios. One of those opportunities is stealth bomber maker Northrop Grumman.
Tuesday, Morgan Stanley analyst Kristine Liwag updated her defense sector view to "Attractive" from "In-line." She noted that despite DOGE-related fears of spending cuts, U.S. defense spending should continue to rise, and that export demand for weapons systems should improve as European nations begin to spend more.
DOGE is the agency headed by Elon Musk that is looking to root out wasteful spending for President Trump.
Northrop Grumman stock is Liwag's top pick. She kept her Buy rating on the stock, and raised her price target to $625 from $580. Its product portfolio has "strong alignment to enduring" defense needs.
Northrop Grumman is one of the largest defense companies in the world, with a diversified portfolio of smart bombs, missiles, uncrewed systems, manned fighter jets, space, and cyber technologies.
It's the only large U.S. defense contractor stock up since the Nov. 5 election. Shares have gained 3% since then. Shares of Lockheed Martin, General Dynamics, and L3Harris Technologies are down 11% on average.
Liwag also downgraded General Dynamics stock to Hold from Buy and cut her price target to $305 from $315. General Dynamics also makes business jets, which are more susceptible to tariff-related cost increases and falling demand in an economic downturn.
General Dynamics stock was flat in premarket trading at $277.44, while S&P 500 futures were down 0.8%. Dow Jones Industrial Average futures were flat. Northrop stock was down 0.3% at $527.68.
With the downgrade, 46% of analysts covering General Dynamics stock have Buy ratings, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for General Dynamics stock is about $286.
About 57% of analysts covering Northrop stock have Buy ratings. The average analyst price target is $555.
Write to Al Root at allen.root@dowjones.com
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April 16, 2025 08:02 ET (12:02 GMT)
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