Bloomberg News

Raytheon, Northrop Lead Defense Stock Downgrades by JPMorgan

January 08, 2013

JPMorgan downgraded Northrop Grumman Corp. (NOC:US), Raytheon (RTN:US) Co. and Harris Corp., three companies that were among the best defense investments in 2012.

“Following a year in which the group as a whole performed surprisingly well, we are downgrading some of the top performers,” analyst Joseph Nadol wrote today in a note to clients.

Nadol cut Raytheon, the largest missile supplier to the U.S. Defense Department, to neutral from overweight. The Waltham, Massachusetts-based company returned 23 percent in 2012 including dividend payments. Raytheon shares fell 1.1 percent to close at $57.74 in New York.

Northrop Grumman, maker of Global Hawk drones, was revised to underweight from neutral. The Falls Church, Virginia-based defense contractor returned 20 percent last year. Its shares declined 1.9 percent to $67.34.

Harris (HRS:US), a maker of communications equipment, was cut to underweight from neutral. The Melbourne, Florida-based company returned 40 percent last year. Harris shares fell 2.3 percent, the biggest decline in more than two months, to close at $48.91.

Defense contractors face automatic Pentagon cuts totaling about $45 billion this year unless the White House and lawmakers agree by March 1 to an alternate deficit reduction plan.

“We believe that Republicans as a group put a higher priority on spending cuts than they do on preserving the defense budget,” raising the risk no deal will be reached before the deadline, Nadol wrote in a separate note to clients today.

To contact the reporter on this story: Nick Taborek in Washington at ntaborek@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net


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Companies Mentioned

  • NOC
    (Northrop Grumman Corp)
    • $133.66 USD
    • 1.22
    • 0.91%
  • RTN
    (Raytheon Co)
    • $103.35 USD
    • 0.87
    • 0.84%
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