Shares of defense stocks General Dynamics (GD) and L3Harris Technologies (LHX) were little changed in today’s trading after Morgan Stanley recently adjusted its ratings. Indeed, 4.4-star analyst Kristine Liwag upgraded General Dynamics to Buy and boosted its price target from $293 to $345. Meanwhile, she downgraded L3Harris to Hold and lowered its price target from $275 to $257.
Before the Q2 earnings reports, Morgan Stanley’s “Defense Primes”–General Dynamics, L3Harris, Northrop Grumman (NOC), and Lockheed Martin (LMT)–lagged behind the S&P 500. However, all had strong quarters due to better supply chain conditions and solid defense spending. Liwag sees General Dynamics as having strong growth potential with its new Gulfstream jets and high demand for defense products.
On the other hand, she downgraded L3Harris because its recent Aerojet deal has increased its debt, which will limit short-term growth compared to its peers. She also kept Northrop’s rating at Buy due to improvements like resolving B-21 bomber profitability issues. In addition, Liwag maintained Lockheed’s Hold rating but noted improvements in its revenue growth.
It’s worth noting that, so far, Liwag has enjoyed a 60% success rate on her ratings, with an average return of 8% per rating.
What Are the Best Defense Stocks to Buy?
Overall, analysts expect LHX stock to deliver the most upside potential from current levels. Indeed, it has a Moderate Buy rating with more than 16% upside potential based on a $266.20 per share price target.
