Al Root

On Friday, Goldman Sachs analyst Noah Poponak rejiggered his ratings and price targets on defense stocks. The big winner was shipbuilder Huntington Ingalls Industries. It caught the rare double upgrade to Buy from Sell.

Wall Street typically raises, or cuts, ratings one notch at a time, from Sell to Hold and from Hold to Buy. A double upgrade, or downgrade, typically means the analyst sees something drastic in the cards.

Huntington stock is up 2.1% at $205 in early trading Friday, while S&P 500 and Dow Jones Industrial Average futures were up 0.2% and 0.1%, respectively. Futures were volatile after China announced it was hiking tariffs on U.S. imports to 125%, retaliating for rising U.S. import tariffs on Chinese goods.

China also has an estimated 200 times the shipbuilding capacity of the U.S., a gap President Donald Trump says he wants to close.

"We expect Navy shipbuilding to be [a] relatively high priority within the defense budget medium-term and for Huntington to benefit," says Poponak. "A recent executive order appears to cement the administration's focus on domestic maritime labor, supply chains, and production, and there is the possibility for Shipyard Accountability and Workforce Support $(SAWS)$ language to be implemented in the future. That could drive margin upside for Huntington."

Poponak's price target on Huntington stock went to $234 from $145.

Along with upgrading Huntington, he raised his rating on L3Harris Technology to Buy from Hold, lifting his price target is $263, up from $198.

"Management has leaned into innovation and disruptive technology more than peers, and we believe the company is well positioned as the Pentagon shifts to commercial technology and business models," wrote the analyst.

L3Harris stock was up 1.8% at $217.30 in early trading.

There was a downgrade. Poponak cut his rating on defense information technology provider Booz Allen Hamilton to Hold from Buy. His price target went to $109 from $150.

"We expected Booz's expertise in AI and Cyber to insulate it from broad cuts, but the DOGE contract-reduction data imply that the company has been experiencing more reductions than peers," wrote Poponak. "The government continues to make statements that [indicate] it is specifically looking at consulting. And Booz has some of the toughest comps and highest valuation multiples across the sector."

Booz Allen stock was down 3.1% at $105.49 in premarket trading. Coming into Friday trading, Booz stock was down 41% since the election.

With the downgrade, 40% of analysts covering Booz Allen stock have Buy ratings, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Booz stock is about $146 a share.

The average price targets for Huntington and L3Harris are $193 and $256, respectively. About 31% of analysts covering Huntington rate shares at Buy. The Buy-rating ratio for L3Harris is 78%.

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

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April 11, 2025 09:37 ET (13:37 GMT)

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