Analyst Loves 5 Defense and Aerospace Giants as Tax Reform Plan Winners

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Raytheon

This company has a diversified mix of businesses and remains a favorite on Wall Street. Raytheon Co. (NYSE: RTN) is an industry leader in defense, government electronics, space, information technology and technical services. The company operates in four principal business segments: Integrated Defense Systems, Intelligence, Information and Services, Missile Systems, and Space and Airborne Systems.

Top Wall Street analysts feel that the company could be one of the biggest winners as the global threat environment has been heightened substantially this year, and with 31% of total sales from international, the prospects remain very positive. Many cite the Patriot Missile deal signed with Poland as a good example, which could propel 2018 earnings.

Raytheon is also expected to be the key supplier for the huge recently signed Saudi deal, and that generally suggests it will receive a third of the revenue. The company reported outstanding results, with third-quarter earnings per share from continuing operations above most Wall Street estimates.

Raytheon shareholders are paid a 1.74% dividend. The $212 Baird price objective compares with the posted consensus price target of $205.39. The shares traded most recently at $183.85 apiece.

Spirit AeroSystems

This top aerospace and defense company offers solid upside potential. Spirit AeroSystems Holdings Inc. (NYSE: SPR) is one of the world’s largest non-OEM (original equipment manufacturer) designers and manufacturers of aerostructures for commercial aircraft. Spirit’s core products include fuselages, pylons, nacelles and wing components.

Additionally, Spirit provides aftermarket customer support services, including spare parts and maintenance, repair, overhaul and fleet support services in North America, Europe and Asia. Spirit Europe produces wing components for a host of customers, including Airbus.

Shareholders are paid a small 0.5% dividend. Baird has set its price target at $86. The consensus target is lower at $84.67, and the share price was last seen at $82.24.

Transdigm

This company was hitting our insider buying screens in a big way earlier this year. Transdigm Group Inc. (NYSE: TDG) is a holding company for different businesses that provide a diverse array of products, including ignition systems, pumps, valves, motors, actuators, controls, water faucets and systems, quick disconnects and couplings, batteries, chargers and power conditioning, cockpit security systems, composites and elastomers, audio systems, and lighting and displays.

While Transdigm remains a highly charged stock following a steady barrage of short reports, the stock has solid upside potential. The shares pulled back recently on market concerns around a big sales miss, but the Baird team stays positive on the stock.

Baird price target of $300 is more or less in line with the consensus target of $299.12. The stock closed most recently at $271.95 a share.

These five top companies could ramp up earnings big time if the tax plan in its current form goes through. Plus, given the volatile situations around the globe and big foreign purchasing, the sector remains a good place to keep capital in growth portfolios.