Wells Fargo upgrades L3Harris, says shares could benefit from a potential government shutdown


Wells Fargo says that investors could benefit from L3Harris’s discount relative to other defense technology companies. In a note published on Monday, the bank upgraded defense technology to overweight from equalweight, and set a new price target of $209, up from $204. Wells Fargo forecasts a 21% increase from Friday’s close of $172.72. L3Harris Technologies’ stock is down more than 17% since the beginning of the year. LHX YTD L3Harris Technologies Stock. Analyst Matthew Akers stated in a report that LHX’s portfolio is suited to grow at least at the same rate as its defense peers in the next few years. The stock also trades at a substantial discount. Analyst Matthew Akers said that L3’s estimates are likely to have bottomed out and that government shutdowns usually benefit defense stocks. Akers said that “shutdown fears may provide an attractive entry level near-term.” Prior shutdowns were short (generally less than a month) and did not have a significant impact on the profits of defense companies. He wrote that historically, the first few weeks of a shutdown have been great times to invest in defense stocks, as they outperform the market on average by 400 basis points the month after. L3’s catalysts include higher earnings estimates due to the recent acquisition of AerojetRocketdyne; a December Investor Day highlighting new long term targets; and the sale “non core assets” which will help pay off debt. Akers upgraded Lockheed Martin from underweight to equal weight in the same report and kept his price target of $440. General Dynamics, Northrop Grumman, Raytheon, Booz Allen Hamilton, CACI International, and Leidos Holdings all had their price targets lowered. Wells upgraded L3 Harris Monday after Citigroup initiated research coverage by giving a buy recommendation. Michael Bloom, a CNBC reporter, contributed to this article.