U.S. defense shares shrug off Trump criticism, set for further gains

Tue Jan 31, 2017 5:35pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Caroline Valetkevitch and Mike Stone

NEW YORK/WASHINGTON (Reuters) - U.S. defense company shares have largely shrugged off President Donald Trump's criticisms over costs and may be poised to fly higher even with prices at lofty levels.

Promises by Trump to expand the U.S. military give many investors and analysts confidence the defense industry will grow strongly in coming years.

"There's a multi-year upturn in play here. If you believe we're in the first inning of a multi-year up cycle, the valuations can stay extended for a longer period of time," said Peter Arment, an aerospace and defense analyst at Robert W. Baird & Co.

Bank of America-Merrill Lynch analyst Ronald Epstein in his 2017 defense industry outlook said the up cycle started before the election, but the Republican sweep in Congress could mean even more robust growth in defense than previously expected.

Defense shares shot up just after the Nov. 8 election but have experienced volatility as Trump in tweets and comments has attacked the defense contractors on costs.

He targeted Boeing Co (BA.N: Quote) on Dec. 6 with tweets for "out of control" costs on new Air Force One planes and said the order should be canceled.

On Dec. 12 Trump slammed Lockheed Martin Corp's (LMT.N: Quote) F-35 fighter jet program as too expensive. On Monday Trump said he and Lockheed Martin had trimmed $600 million from the latest contract to buy 90 of the F-35 fighters.

But Lockheed's shares ended Monday's session little changed, and analysts downplayed news of the cuts, saying they were likely already being planned by the company, which is the Pentagon's No. 1 weapons supplier.   Continued...

A RAF Lockheed Martin F-35B fighter jet taxis along a runway after landing at the Royal International Air Tattoo at Fairford, Britain July 8, 2016.  REUTERS/Peter Nicholls/File Photo