Aerospace & Defense

Wells Fargo Starts Bullish Coverage on 6 Aerospace and Defense Stocks

Booz Allen

Booz Allen Hamilton Holding Corp. (NYSE: BAH) provides management and technical consulting services to governments, corporations and nonprofit organizations. Wells Fargo has given the stock an Overweight rating with a price target of $96, implying upside potential of 18%.

Akers’s story on the stock is clear: “We see BAH continuing to outgrow peers organically, driven by outsized exposure to key technology areas such as Cyber, Cloud, and AI.” Valuation has also dropped back “to the midpoint of its range over the past few years, from a large premium in 2020.”

The stock traded up 2.4% to $82.65 on Thursday, in a 52-week range of $68.34 to $100.26. Booz Allen pays an annual dividend of $1.48 (yield of 1.83%) and has a consensus price target of $92.09. The average daily volume is about 1.1 million, and the company’s market cap is about $11.4 billion.

Leidos

Leidos Holdings Inc. (NYSE: LDOS) is another services company getting an Overweight rating from Wells Fargo. The company’s price target is $120, and the upside potential is 15%.

In late December, Leidos finally cleared its win for an $8 billion contract to upgrade the U.S. Navy’s enterprise network, known as NGEN. Akers writes, “We believe LDOS will outgrow its peers in 2021 driven by its NGEN program ramp, COVID-19 impact subsiding and Security, Detection and Automation business recovery along with recent acquisitions.” Leidos’s scale is also “a larger differentiator than many may realize as federal contracts data appear to show the government is consolidating many smaller programs into large contracts over time.”

Leidos shares traded up about 1.6% Thursday morning to $103.04, in a 52-week range of $79.15 to $113.75. The company pays an annual dividend of $1.36 (yield of 1.34%). The consensus price target is $117.70. The average daily trading volume is around 1 million shares, and the company’s market cap is right around $15 billion.

General Dynamics

Among the five defense contractors in Wells Fargo’s coverage, General Dynamics Corp. (NYSE: GD) is the only one to earn an Overweight rating. With a price target of $216, the company’s upside potential is 13%.

Akers says, “We believe GD’s defense portfolio lends itself to above-peer growth in the coming years, driven by shipbuilding programs, along with a relatively positive Procurement/RDT&E [Research Development Test & Evaluation] mix as Columbia [ballistic missile submarine] transitions to production.”

Shares traded up about 1.9%, at $190.33 in a 52-week range of $129.11 to $197.51. General Dynamics does not pay a dividend, and the consensus price target is $193.65. The average daily trading volume is around 1.2 million shares. The company’s market cap is about $54.5 billion.


Here are the other eight stocks included in Wells Fargo’s coverage of the aerospace and defense industry:
  • Boeing: Equal Weight with a price target of $244 and 7% upside potential
  • L3Harris: Equal Weight with a price target of $225 and 5% upside potential
  • Woodward: Equal Weight with a price target of $130 and 4% upside potential
  • Raytheon: Equal Weight with a price target of $87 and 3% upside potential
  • SAIC: Equal Weight with a price target of $95 and 7% upside potential
  • Lockheed Martin: Equal Weight with a price target of $384 and 1% downside potential
  • ManTech: Equal Weight with a price target of $83 and 1% downside potential
  • Northrop Grumman: Under Weight with a price target of $330 and 10% downside potential