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Summary of US Aerospace & Defense Stock Analysis (June 2025)

Core Content

This document provides an updated analysis of US Aerospace & Defense (A&D) stocks by Citigroup Research, including revised price targets, stock rankings, and investment outlooks based on recent M&A activity, legislative changes, and market dynamics. The report highlights key investment points, debates, and catalysts for each listed company.

Stock Rankings and Price Targets

Key Investment Points

• Curtiss Wright Corp (CW):

  • Strong visibility in aircraft, shipbuilding, and C4I sectors.
  • Increased price target to $525.00 due to higher FTM EBITDA multiple.
  • Solid FCF conversion and shareholder returns through dividends and repurchases.

• Karman Space & Defense (KRMN):

  • Positioned in fast-growing defense areas: strategic missiles, tactical missiles, and space.
  • Increased price target to $58.00 due to recent M&A and potential Golden Dome contracts.
  • Raised revenue and EBITDA estimates after acquiring ISP.

• L3Harris Technologies (LHX):

  • Organic revenue growth from global defense budgets.
  • Margin expansion from merger synergies and contract re-pricing.
  • FCF conversion over 100% expected to fund de-leveraging and offset dilution.
  • Strategic focus on space and C4I initiatives.

Key Debates

• Curtiss Wright Corp (CW):

  • Revenue growth mix and potential impact of commercial aerospace OEM performance.
  • Tariff-related risks and uncertainty around program adjustments.

• Karman Space & Defense (KRMN):

  • Impact of the new administration on defense spending and contract mix.
  • Resilience of EBITDA margins in a cost-focused environment.

• L3Harris Technologies (LHX):

  • Impact of DOGE on program continuity.
  • Integration of acquisitions and achievement of accretion targets.
  • Margin outlook for the IMS segment as it transitions to space-based missions.
  • Margin dynamics in the Space segment due to the shift towards high-volume LEO spacecraft.

Key Catalysts

• Curtiss Wright Corp (CW):

  • New contract awards and program delivery milestones.
  • Detailed FY26 Budget release.
  • Positive FCF performance and shareholder returns.

• Karman Space & Defense (KRMN):

  • Award activity on new platforms and expansion of content on existing ones.
  • M&A activity that adds capabilities and drives new awards.
  • Updates on the Golden Dome program.

• L3Harris Technologies (LHX):

  • Portfolio announcements and major award activity.
  • M&A activity and strategic acquisitions.
  • Earnings reports that show revenue and EBITDA growth.

Earnings Estimates

Summary of Changes

• Curtiss Wright Corp: Price target increased from $444.00 to $525.00.
• Karman Space & Defense: Price target increased from $46.50 to $58.00.
• L3Harris Technologies: Price target increased from $245.00 to $280.00.

Conclusion

The report underscores the positive outlook for the US A&D sector, driven by increased defense spending, strategic M&A activity, and legislative support. Analysts have updated price targets and rankings based on improved revenue visibility, margin expansion potential, and key program developments. Investors are advised to consider these updates as part of a broader decision-making process, given the potential for macroeconomic and political shifts to impact the sector.