Wells Fargo announces Ratings Changes to Aero/Defense Stocks: Upgrades RTN, Downgrades LMT

August 30, 2010 7:04 AM EDT
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Price: $146.95 -0.05%

Rating Summary:
    18 Buy, 8 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 23 | Down: 37 | New: 34
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Wells Fargo announces ratings changes to Aero/Defense stocks.

Raytheon (NYSE: RTN) is upgraded from Market Perform to Outperform. Lockheed Martin (NYSE: LMT) is downgraded from Outperform to Market Perform

Wells analyst says, "(1) Adjusted for pension expense expectations, RTN shares are significantly cheaper than LMT; (2) RTN International sales exposure could be a buffer against DoD spending declines; (3) RTN’s strong balance sheet (even if additional pension funding were necessary) allows more flexibility to improve shareholder value through buybacks, dividend increases and acquisitions; and (4) RTN has significantly underperformed LMT and the group, especially since the announcement of the E-Borders charge in late July, making near-term price appreciation more likely, in our view."

Wells analyst also reduces 2011 EPS estimates for lower pension discount rates (on several Aero/Defense firms:

"We adjusted 2011E EPS for Goodrich (to $5.00 from $5.25), Lockheed Martin (to $7.10 from $7.60), Northrop Grumman (to $6.55 from $6.75), and Raytheon (to $4.95 from $5.20)."

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