General Dynamics rated Buy at Deutsche, XPO gains on upgrade: 4 big analyst picks

By Davit Kirakosyan

Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: a Buy initiation at General Dynamics, and upgrades at XPO, Kosmos Energy, and Huntington Ingalls.

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General Dynamics initiated with Buy rating at Deutsche Bank

General Dynamics (NYSE:GD) shares rose more than 1% pre-market today after Deutsche Bank initiated coverage on the company with a Buy rating and a price target of $271.00, as reported in real-time on InvestingPro.

We like the wide moats, improving ROIC, and favorable FCF growth profile of GD’s Aerospace, Combat Systems, and Marine businesses, and view GD’s ~7.5% fwd FCF yield as offering opportunity for investors to buy quality growth at a reasonable price.

The bank anticipates the company’s free cash flow per share to grow at a double-digit CAGR through 2025 and sees potential for even higher growth than current market predictions, especially considering possible reductions in capital expenditures.

XPO gains on Evercore upgrade

XPO (NYSE:XPO) shares closed nearly 3% higher yesterday after Evercore ISI upgraded the company to Outperform from In Line and raised its price target to $79.00 from $72.00.

The firm highlighted that, despite usually hesitating to upgrade already soaring stocks, XPO shows strong potential. The company benefited from the YELL liquidation, seeing increased volumes since July and potential margin growth. New board and management changes have improved efficiency and service.

Furthermore, although the stock has outperformed the peer group year to date, the multiple discount at which XPO has traded for years is likely to narrow further as management gains more credibility for the reversion path forward.

Two more upgrades

BofA Securities upgraded Kosmos Energy (NYSE:KOS) to Buy from Neutral and raised its price target to $10.00 from $8.70. As a result, shares gained more than 6% yesterday.

We see Kosmos as a highly differentiated E&P proposition, advantaged in its: (1) growth proposition; (2) reserve life of >20-years; and (3) pivot towards liquified natural gas (LNG).

JPMorgan upgraded Huntington Ingalls Industries (NYSE:HII) to Overweight from Neutral with a price target of $247.00 (from $250.00).

The firm noted that despite a 10% decline in Huntington’s stock over the past three months without significant news, and a challenging market for Defense stocks, it views the current price as a good opportunity for investors. The firm cited clear revenue prospects, the potential for improved margins, and an anticipated increase in cash flow next year.

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