By Senad Karaahmetovic
Credit Suisse analysts initiated research coverage on the Aerospace and Defense sector today. The analysts are the most positive on the Defense sector, while their views on Commercial Aerospace and Space are “mixed” and “negative”, respectively.
Given the state of the world today, Credit Suisse prefers defense stocks.
“We think Defense is likely to be a GDP+ growth industry for the remainder of the decade and forecast a 7.9% 8-yr CAGR for the DoD investment accounts. Estimate upside potential looks constrained in the near term, but we believe 2024E sales growth could be more than double current sell-side expectations. We think the industry can deliver ~13% 3-yr IRRs assuming no further derating and an 8% 3-yr IRR assuming a 100bps derate on FCF yield,” the analysts said in an initiation note.
They initiated research coverage on 7 defense stocks, with BWXT (NYSE:BWXT), L3Harris (NYSE:LHX), and Northrop Grumman (NYSE:NOC) earning an Outperform rating. General Dynamics (NYSE:GD) and Huntington Ingalls (NYSE:HII) are started at Neutral, while Lockheed Martin (NYSE:LMT) has an Underperform rating.
Elsewhere, Boeing (NYSE:BA) is started at Underperform while Raytheon Technologies (NYSE:RTX) has a Neutral rating.
Overall, long NOC, BWXT, and HEICO (NYSE:HEI), as well as short Boeing, are Deuschle’s top ideas within the Aerospace and Defense sector.