Aerospace & Defense

Goldman Sachs Has 4 Top Pick Defense Stocks to Buy for 2021

Lockheed Martin

This is one of the top aerospace and defense stocks to buy, and many on Wall Street are expecting a very solid continuation of U.S. and foreign defense spending in 2021. Lockheed Martin Corp. (NYSE: LMT) researches, designs, develops, manufactures, integrates, operates and sustains advanced technology systems, products and services. It also provides a wide range of defense electronics products and IT services.

Being the Pentagon’s prime contractor, Lockheed Martin offers a diverse portfolio of global aerospace, defense, security and advanced technologies. Its leveraged presence in the Army, Air Force, Navy and IT programs guarantees a steady inflow of follow-on orders, not only from the U.S. government but also from many foreign allies of the nation.

Goldman Sachs feels this large-cap leader is still one of the best ideas, noting this in the research report:

Over the last several years, Lockheed Martin’s backlog has substantially outgrown the rest of the industry, supporting the growth outlook for the foreseeable future. The company has exposure to Department of Defense priority buckets, and consistently executes well. Even if the end market growth rate slows, we expect continued strong fundamentals, with compounding earnings and cash flows.

Investors receive a 2.95% dividend. The $451 Goldman Sachs price objective is above the $436 consensus target. Lockheed Martin stock closed at $352.60 on Thursday.

Mercury Systems

Many across Wall Street see this as one of the only pure-plays on defense electronics. Mercury Systems Inc. (NASDAQ: MRCY) provides secure processing subsystems for various critical defense and intelligence programs in the United States.

The company’s products and solutions are deployed in approximately 300 programs with 25 defense prime contractors. Its principal programs include Aegis, Patriot, Surface Electronic Warfare Improvement Program, Gorgon Stare, Predator, F-35 and Reaper.

Mercury Systems also designs, markets and licenses software and middleware environments under the MultiCore Plus name to accelerate development and execution of signal and image processing applications on a range of heterogeneous and multi-computing platforms.

Goldman Sachs has an $89 target price. The consensus target is $91.60, and the shares rose almost 3% on Thursday to close at $84.32.

Given the volatile situations around the globe, and big foreign purchasing, the sector remains a good place to keep capital in growth portfolios. With the potential for a market top remaining precarious in 2021, it may make sense to scale buy shares now, a little at a time, and see how earnings for the fourth quarter come in.

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