Truist Initiates Coverage on Northrop and Lockheed with 'Buy' Rating

Truist Securities has initiated coverage on Northrop Grumman (NOC) and Lockheed Martin (LMT) with a 'Buy' rating, citing recent pullbacks as compelling entry points. The analyst noted that both stocks have dropped 18% and 24.5%, respectively, from recent highs, presenting an attractive opportunity for investors. Truist believes that fears related to defense budget constraints and the impact of cryptocurrencies like Dogecoin (DOGE) on defense spending are overblown. The analyst expects U.S. and NATO defense spending to continue to rise in the coming periods, supporting long-term growth for both companies.

Northrop Grumman received a $544 price target, with Truist highlighting the company's nuclear triad programs, including the B-21 Raider and Sentinel GBSD, as key drivers of stability and growth. Strong demand for missiles and munitions further supports the company's outlook. Lockheed Martin was assigned a $579 price target, with Truist downplaying concerns over the F-35 program's future. The brokerage expects robust missile revenue growth and potential upward revisions to free cash flow, noting that elevated U.S. and NATO defense spending should sustain long-term growth for both companies.



The correlation between LMT and NOC is 0.47, which is considered to be moderate. This suggests that the two assets have some degree of positive relationship in their price movements, but not so high that they are perfectly correlated. This moderate correlation can be acceptable for portfolio diversification, offering a balance between risk and potential returns.



In conclusion, Truist's initiation of coverage on Northrop Grumman and Lockheed Martin with a 'Buy' rating highlights the attractive entry points presented by recent pullbacks in both stocks. The analyst's expectation of continued U.S. and NATO defense spending, along with the strong fundamentals and growth prospects of both companies, supports the bullish outlook. Investors should consider adding these defense stocks to their portfolios, given the potential for significant upside and the moderate correlation between the two assets.