Citi sees buying opportunities emerging in aerospace, defense selloff

[F-35 Fıghter Jets in flight at sunset]
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Citi is turning more constructive on parts of the aerospace and defense sector after a sharp pullback left several companies trading at compressed valuations despite solid operating trends and strong demand signals.

In a report published Monday, Citi analyst John Godyn said commercial aerospace names, especially those tied to aftermarket services, appear positioned to recover first as airline traffic stabilizes and military aviation demand strengthens. The firm said many aftermarket stocks are trading near three- to five-year valuation lows even after reporting strong first-quarter results.

Citi added positive short-term views on Lockheed Martin (LMT [https://seekingalpha.com/symbol/LMT]), RTX (RTX [https://seekingalpha.com/symbol/RTX]), LOAR Holdings (LOAR [https://seekingalpha.com/symbol/LOAR]) and Voyager Technologies (VOYG [https://seekingalpha.com/symbol/VOYG]), arguing that recent declines created selective buying opportunities tied to long-term defense and aerospace trends.

The report said investors have become overly pessimistic as geopolitical tensions and concerns about U.S. politics pressured defense valuations. Citi argued that easing conflict concerns and fading fears of a Democratic “Blue Wave” election outcome could help defense shares stabilize later this quarter.

For investors, the note suggests Citi sees a disconnect between market sentiment and underlying fundamentals across several aerospace and defense companies. The bank pointed to continued strength in commercial aviation demand, missile systems, shipbuilding and space-related technologies as key themes likely to support earnings growth even if broader markets remain volatile.

BOEING, RTX AND AEROSPACE SUPPLIERS HIGHLIGHTED

Citi raised Boeing’s (BA [https://seekingalpha.com/symbol/BA]) price target to $260 from $256 while maintaining a Buy rating. The bank cited improving aerospace demand, expected increases in 737 Max and 787 production rates, potential certification milestones and stronger defense exposure tied to Middle East tensions.

The firm also expressed optimism about aerospace suppliers and aftermarket companies. LOAR Holdings (LOAR [https://seekingalpha.com/symbol/LOAR]) received a positive 30-day short-term view as Citi pointed to strong commercial aerospace demand and favorable industry trends.

Howmet Aerospace (HWM [https://seekingalpha.com/symbol/HWM]) saw its price target increased to $303 from $271 after the company beat earnings expectations and benefited from stronger margins and revenue growth.

Curtiss-Wright (CW [https://seekingalpha.com/symbol/CW]) and Ducommun (DCO [https://seekingalpha.com/symbol/DCO]) also received higher price targets as Citi highlighted accelerating commercial aerospace trends and improving defense demand.

DEFENSE VALUATIONS SEEN AS COMPRESSED

While Citi expects aerospace shares to recover first, the bank said defense stocks may follow as investors refocus on long-term spending priorities tied to missiles, naval systems, space programs and next-generation defense technologies.

Lockheed Martin (LMT [https://seekingalpha.com/symbol/LMT]) received a positive short-term view even as Citi cut its price target to $571 from $675 to reflect broader sector valuation compression. The bank said Lockheed remains exposed to rising U.S. and international defense budgets, hypersonic weapons programs and the proposed “Golden Dome” missile defense initiative.

Northrop Grumman’s (NOC [https://seekingalpha.com/symbol/NOC]) target price was reduced to $628 from $742, though Citi maintained a Buy rating because of the company’s exposure to nuclear modernization programs, missile defense and growing backlog trends.

Voyager Technologies (VOYG [https://seekingalpha.com/symbol/VOYG]) also drew attention from Citi as a higher-risk growth story tied to defense and space infrastructure. The bank raised its price target to $44 from $36 after the company reported stronger backlog momentum and expanded work tied to missile defense systems.

Citi said Voyager could benefit from growing demand for missile technologies, AI-enabled defense systems and commercial space infrastructure including the Starlab space station project.

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