L3Harris Technologies ( NYSE: LHX ) and Huntington Ingalls ( NYSE: HII ) rank among the five biggest losers on the S&P 500 Friday, both down ~6.5% , after Bank of America downgraded both stocks given persistent supply chain challenges that have shown little sign of fading.
The downgrades appear to have weighed on the entire aerospace and defense sector, with ( NOC ) -5.1% , ( LMT ) -4.3% , ( RTX ) -3.5% , ( GD ) -3.4% .
BofA analyst Ronald Epstein cut L3Harris ( LHX ) to Neutral from Outperform with a $250 price target, saying it is one of the defense companies most affected by supply chain constraints, noting these hurdles along with other macro headwinds have amounted to a ~$250M negative impact to FY 2022 revenues, of which the company has been able to offset 70% of the associated higher costs.
Epstein also cut Huntington Ingalls ( HII ) to Underperform with a $230 PT, saying the company's anticipated 3% annual shipbuilding growth is "underwhelming given the enormity of funding funneling into the U.S. Navy and fleet modernization," after the business grew at a 5.6% compound annual growth rate during 2017-21.
L3Harris ( LHX ) is "back on track" despite missing Q3 earnings estimates, as supply chain issues are fading while the company's contract structure provides pricing power, Leo Nelissen writes in an analysis published recently on Seeking Alpha .
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L3Harris, Huntington Ingalls lead defense names lower after BofA downgrade