RBC Bets On Record Highs From These 2 Defense Stocks

The analyst attention for Boeing, however, was more bearish

Josh Selway
Apr 6, 2018 at 10:00 AM
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Despite the recent market turbulence, including this morning's tariff-induced drop, defense stocks Northrop Grumman Corporation (NYSE:NOC) and Raytheon Company (NYSE:RTN) have held up well -- especially compared to sector peer Boeing Co (NYSE:BA). Brokerage firm RBC is betting on even more upside for NOC and RTN stocks, too, raising its price targets this morning on both names.

RBC Eyes a 17% Surge From NOC Shares

Starting with Northrop Grumman, RBC hiked its price target to $419 from $400, which represents a 17.3% premium to the shares' current perch near $357.10. While the security is trading down 0.8% today amid the broad-market headwinds, it just yesterday reached a record high of $360.88, and is up more than 50% in the past year.

Most analysts share RBC's bullish outlook, as 10 of the 14 in coverage have "strong buy" ratings in place. Options traders are also optimistic, judging by the 10-day call/put volume ratio of 1.75 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading ranks in the high 94th annual percentile, meaning call buying has been unusually popular in recent weeks, relative to put buying.

Wall Street Bullish On RTN Stock

Turning to Raytheon, RBC set a $262 price target, up from its previous mark of $244. The equity was last seen trading down 0.6% at $218, so it would need to rally more than 20% to reach RBC's target. Of course, RTN's long-term trend suggests such a move is possible, as it's gained over 45% in the previous 12 months, and has experienced just three negative quarters in the past five years. Back on Feb. 27, the stock hit an all-time peak of $222.82.

Like it's sector peer NOC, Raytheon has enjoyed almost exclusive bullish attention from analysts. Specifically, 12 of the 14 tracking the security say to buy it. Another similarity to Northrop is the action seen from options traders, with call buying more than tripling put buying during the past two weeks at the ISE, CBOE, and PHLX.

Boeing Price Target Trimmed

While we're here, it's worth noting that RBC weighed in on Boeing, too. The firm cut its price target on the Dow component to $358 from $378, though that's still above BA's price today of $331.05. Eleven of 17 covering analysts still have "strong buy" ratings on Boeing.


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