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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