NEW YORK (AP) -- Shares of defense contractors, after weathering what many believe may be the worst of the Pentagon's budget cutting rose on Thursday as Goldman Sachs upgraded the industry as a whole.
Goldman analyst Noah Poponak said that if federal budget cuts that went into effect this year marked the last for the companies in this downturn, they could outperform the overall market for the next several years.
"And even if there are more cuts beyond sequestration, downside risk may be fairly limited given how well companies on average have weathered a tough storm thus far," Poponak wrote.
Poponak boosted his rating for Lockheed Martin Corp. to "Buy" and added it to the investment bank's conviction list, saying that the company has one of the strongest cash profiles and its business is one of the best positioned.
He also upgraded L-3 Communications Holdings Inc. and Northrop Grumman Corp. both to "Buy," noting the shareholder benefits of their stock buybacks and dividend yields.
In addition, he boosted his rating for Raytheon Co. to "Neutral," pointing to its strong cash profile, and backed his "Buy" rating for Alliant Techsystems Inc., given its non-Department of Defense business and merger and acquisition potential.
Here's how shares of some defense contractors traded Thursday:
— Lockheed Martin, up $1.35 to $107.51.
— L-3, up $2.21, or 3 percent, to $86.82.
— Northrop Grumman, up $1.51 to $83.38.
— Raytheon, up 67 cents to $67.77.
— Alliant Techsystems, up 65 cents to $78.83.
— General Dynamics Corp., up 97 cents to $78.50.
— AeroVironment Inc., up 40 cents to $21.23.
analyst Noah Poponak boosted his view of the overall defense industry to "Attractive" from "Neutral."