Top Wall Street analysts have felt for some time that L3 Harris Technologies is situated well in the high growth buckets of the Defense Department budget, and many believe the business is not as short-cycle as the market historically has perceived. Merger synergies give the business a unique path to cash flow and margin upside, along with above-average revenue growth.
L3 Harris Technologies stock comes with a 2.03% dividend. Royal Bank of Canada has set its price target at $285, well above the consensus target. The stock was last seen on Thursday trading at $209.35.
Northrop Grumman
This was ranked as one of the top five defense contractors by sales last year, and it is on the BofA Securities US 1 list of top stock picks. Northrop Grumman Corp. (NYSE: NOC) provides innovative systems, products and solutions in unmanned systems, cyber, C4ISR and logistics and modernization to government and commercial customers worldwide.
The Aerospace Systems segment designs, develops, integrates and produces manned aircraft, unmanned systems, spacecraft, high-energy laser systems, microelectronics and other systems and subsystems.
The Information Systems segment offers advanced solutions for the Defense Department, national intelligence and federal civilian, state, international and commercial customers. It provides products and services primarily in the fields of command and control, communications, cyber, air and missile defense, intelligence processing, civil security, health information technology, and government support systems.
The Technical Services segment provides logistics, modernization and sustainment services, as well as other advanced technology and engineering services, including space, missile defense, nuclear security, training and simulation services.
Shareholders receive a 1.57% dividend. Northrop Grumman stock has a $550 target price at BofA Securities. The consensus target is lower at $513.12, and shares closed at $470.48 on Thursday.
Raytheon Technologies
This top aerospace and defense idea has a diversified mix of businesses. Raytheon Technologies Corp. (NYSE: RTX) is an industry leader in defense, government electronics, space, information technology and technical services.
With a history of innovation spanning 97 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I products and services, sensing, effects and mission support for customers in more than 80 countries.
In 2020, United Technologies and Raytheon agreed to merge their businesses to create this new aerospace and defense powerhouse. The two-year-old merger, combined with the spin-off of the Carrier and Otis divisions in 2020, has top analysts across Wall Street expecting free cash flow to step up in a big way this year. Toss in the solid recovery in air travel and improving sentiment that could help drive the commercial aerospace business.
Investors receive a 2.68% dividend. Morgan Stanley analysts have a price objective of $124. The consensus target is $108.83, and Raytheon Technologies stock closed on Thursday at $82.34.
The stock market is in a bear market, and very possibly has the potential to trade down an additional 15% from current levels. With the geopolitical situations in various parts of the world quite tense, and on-the-ground fighting raging in Ukraine, it is a good bet these companies will continue to receive orders from around the world. For now, these top stocks may be among the safer ideas for the rest of the year and into 2023.
Originally posted at 24/7 Wall St.
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