Citi says defense stocks still attractive despite Monday’s rally

Citi says defense stocks remain attractive despite Monday’s share rally. Defense stocks continue to price in 0% to 3% free cash flow growth after Monday’s rally, which was driven by renewed conflict in the Middle East, the analyst tells investors in a research note. The firm continues to expect low-single digit sales growth for Department of Defense and mid-single digit growth for defense contractors through 2030 as spending mix shifts to the weapons buying accounts. The events of this past weekend make this outcome more likely, as they demonstrate that the threat environment to the U.S. and its allies remains high, contends Citi. It has Buy ratings on General Dynamics (GD), Leidos (LDOS), L3Harris Technologies (LHX), Lockheed Martin (LMT) and SAIC (SAIC).