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Key Takeaways
- Northrop Grumman, Lockheed Martin, and other companies in the aerospace and defense sectors that count the U.S. government as a major client are set to report earnings this week.
- Some analysts think those companies could be conservative in with their outlooks as a federal shutdown drags on. That could weigh on their stocks in the near term, suggesting a buying opportunity, Morgan Stanley said.
The government shutdown hasn’t been great for defense stocks. But it could be time to buy them.
Companies that supply the U.S. military and other areas of the government have faced near-term uncertainty this month as the shutdown has stretched into its fourth week. That’s weighed on the shares: The iShares U.S. Aerospace & Defense ETF (ITA) and Invesco Aerospace & Defense ETF (PPA), for example, were largely left out of last week’s broader market gains, finishing about flat while the S&P 500 rose close to 2%. Both are down from early October highs.
That could mean a chance to buy stocks that stand to get a boost when more clarity around government funding becomes available, according to some Wall Street analysts. Some companies may offer muted outlooks during the shutdown, analysts said, which could be revised upward.
“We’d be buyers of tepid Defense outlooks as upward revisions should materialize as the funding picture clears up,” Morgan Stanley analysts wrote in a recent note.
Why This Matters for Investors
The government shutdown has injected some uncertainty into the outlook for government spending. That uncertainty, some analysts say, could be a source of profitable ideas—such as defense companies that derive a large portion of their business from the U.S. military, which may soon offer up tepid outlooks that could be upgraded later.
Northrop Grumman (NOC), which is set to report earnings Tuesday, could set the tone. Morgan Stanley’s price target of $720 suggests roughly 20% upside from Monday’s close at $602 and is well above the mean of analysts surveyed by Visible Alpha around $635.
Northrop Grumman shares, while down about 1% since the shutdown began at the beginning of October, have climbed about 28% in 2025, outperforming the S&P 500’s close to 15% rise over the same period.
The analysts also said they like Lockheed Martin (LMT), which is set to report Tuesday along with RTX Corp. (RTX), and GE Aerospace (GE). CACI (CACI) is due to follow later in the week. Boeing (BA) and L3Harris (LHX) are scheduled to post results next week.
Shares of Northrop Grumman, RTX, and others were higher Monday afternoon amid broader market gains. In an interview with CNBC, White House Economic Advisor Kevin Hassett said he expects the shutdown “is likely to end sometime this week.” On Polymarket, bettors current see the shutdown ending between Thursday and Sunday as slightly more likely than by next Monday-Thursday.
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