** Morgan Stanley lifts PT on U.S. defense companies

** Brokerage says ongoing government shutdown will drive conservatism in 2026 outlook, with upward revisions materializing as funding picture clears up

** "Demand across aerospace remains robust within commercial aftermarket and aircraft backlogs remain largely sold out through the decade," Morgan Stanley says

** Says rare earth supply within the Aerospace supply chain remains a watch item, though it has not yet seen any implications for the sector

** Says it sees a short-term shutdown as largely manageable for Primes, but notes a longer-term shutdown could add challenges for the sector

** Following are the new PTs:

(Reporting by Parth Chandna)

((Parth.Chandna@thomsonreuters.com;))