Seeking Alpha

General Dynamics, Huntington Ingalls, Harris downgraded at Barclays

  • Defense stocks General Dynamics (GD), Huntington Ingalls (HII) and Harris Corp. (HRS) are downgraded at Barclays due to “raised expectations, discounts largely erased, and unlikely premium growth."
  • Although defense company revenues should trough in 2015, the firm is not sure the achievable growth rate coming out is sufficient to warrant an above-market multiple, especially given average EPS growth on a declining revenue base, coming essentially from pension and repos alone.
  • The firm also expects M&A activity to gradually increase, potentially driving shareholder rotation out of a group that is no longer under-owned.
  • The price target for Raytheon (RTN), the firm's lone Overweight rated stock in the group, is raised to $115 from $110.
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