Al Root

Shares of aerospace and defense companies Lockheed Martin and RTX rose early Wednesday after picking up a couple of new Buy-equivalent ratings.

Lockheed stock was up 0.9% at $466 a share, while S&P 500 and Dow Jones Industrial Average futures were up 2.5% and 1.9%, respectively. The market was helped by comments from Treasury Secretary Scott Bessent that indicated the U.S. would seek to de-escalate the trade war with China.

RTX shares were up 2.5% at $116.60.

The Lockheed upgrade came from Baird analyst Peter Arment. He took his rating on Lockheed stock to Outperform from Neutral, and kept his $540 price target. An upgrade with not target change tells investors something. Coming into Wednesday trading, shares were down about 15% since the Nov. 5 election. Investors have worried that shifting spending priorities at the Pentagon could result in fewer F-35 jets.

Fears might be overdone. Arment cited Lockheed's "strong first-quarter 2025 [earnings] print, accompanied by management's bullish tone across segments, led by an insatiable global demand for missile/missile defense platforms." He adeded, "Negative watch items entering [the quarter] -- F-35 headline risk, DOGE, and [missile] charges -- appear to carry little downside risk for 2025."

With the upgrade, 46% of analysts covering Lockheed stock have Buy-equivalent ratings. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Lockheed stock is about $520.

Morgan Stanley's Kristine Liwag was the one upgrading RTX. She took her rating to Buy from Hold and left her price target at $135.

The upgrade comes after a tough day for RTX stock. Shares fell 9.8% on Tuesday after the company's first-quarter earnings report. Liwag blamed tariff concerns, which she believes are manageable, given that more than half of the business is tied to "more insulated" national defense. Wednesday's declines made the stock's "risk/reward" profile look more positive.

With the upgrade, 69% of analysts covering RTX stock have Buy-equivalent ratings. The average analyst price target is about $140.

Defense investors have concerns about spending and tariffs, but a defense budget approaching $1 trillion can alleviate many of those fears.

Write to Al Root at allen.root@dowjones.com

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April 23, 2025 07:47 ET (11:47 GMT)

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