Barclays on Industrials: DoD Spending Continuing to Deteriorate, Could H1 Outperformance Be Over?
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Rating Summary:
18 Buy, 13 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Barclays on Industrials: DoD Spending Continuing to Deteriorate, Could H1 Outperformance Be Over?
Barclays analyst said, "Yesterday, the Treasury released DoD June outlay data. Overall, hardware outlays declined 6.3% with weakness at the Army (-13.9%), Navy (-5.4%), and Air Force (8.5%). For the second quarter of the calendar year hardware outlays were down 9.9% (vs. down 9.1% for the first quarter) as the Army (-17.6%), Navy (-1.9%) and Air Force (-15.8%) all experienced continued deterioration."
"With defense stocks on average up ~10% YTD (vs. S&P up ~5%), posting
outperformance that we didn't think was possible earlier in the year, in our view the increasing challenges in the budget environment will make it difficult to outperform in H2. Our long-term view on YTD group leaders Northrop Grumman (NYSE: NOC) (Equalweight), Lockheed Martin (NYSE: LMT) (Equalweight), and L-3 Comm (NYSE: LLL) (Overweight) remains intact; investors with a short-term horizon, however, could see potential opportunities to lighten positions at current levels, ahead of what could broadly be a challenging top-line quarter for the industry."
Barclays analyst said, "Yesterday, the Treasury released DoD June outlay data. Overall, hardware outlays declined 6.3% with weakness at the Army (-13.9%), Navy (-5.4%), and Air Force (8.5%). For the second quarter of the calendar year hardware outlays were down 9.9% (vs. down 9.1% for the first quarter) as the Army (-17.6%), Navy (-1.9%) and Air Force (-15.8%) all experienced continued deterioration."
"With defense stocks on average up ~10% YTD (vs. S&P up ~5%), posting
outperformance that we didn't think was possible earlier in the year, in our view the increasing challenges in the budget environment will make it difficult to outperform in H2. Our long-term view on YTD group leaders Northrop Grumman (NYSE: NOC) (Equalweight), Lockheed Martin (NYSE: LMT) (Equalweight), and L-3 Comm (NYSE: LLL) (Overweight) remains intact; investors with a short-term horizon, however, could see potential opportunities to lighten positions at current levels, ahead of what could broadly be a challenging top-line quarter for the industry."
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