Citi believes it is time to buy defense stocks

Citi analyst Jason Gursky says that since November 2024, defense stocks have “de-rated significantly” given uncertainty about the potential impacts of Department of Government Efficiency and intentions of the Trump administration. The stocks are now pricing in negative 1% to positive 1% growth, which is “too punitive” given the macro backdrop, which likely points to mid-single growth on the horizon, the analyst tells investors in a research note. Citi thinks defense spending in Europe is likely headed significantly higher and points out the U.S. Congress recently passed budget resolutions that add upward of $300B in spending over the next ten years. Importantly, this spending growth is likely to favor modernization in order to buy deterrence against near peers, the firm contends. “As such, we think it’s time to Buy defense stocks,” Citi proclaims. The firm has Buy ratings on Curtiss-Wright (CW), General Dynamics (GD), HII (HII), Leidos (LDOS), L3Harris Technologies (LHX), Lockheed Martin (LMT), Northrop Grumman (NOC), RTX (RTX), SAIC (SAIC), Textron (TXT), and V2X (VVX).