Guggenheim Sees $1 Trillion Defense Budget, Names L3Harris Top Large-Cap Pick

Guggenheim Securities initiated coverage on 22 aerospace and defense companies, expressing a bullish stance on defense contractors and aircraft manufacturers while remaining cautious on commercial aftermarket suppliers. The firm sees a buying opportunity in defense stocks, which have fallen about 25% from their March 2026 peak. Guggenheim forecasts the U.S. base defense budget to reach roughly $1 trillion in fiscal 2027, with investment accounts approaching $600 billion. The firm gave "Buy" ratings to ten companies including L3Harris Technologies, Northrop Grumman, and BWX Technologies, with average implied upside of about 38%. L3Harris is highlighted as the top large-cap pick with a $365 price target. Risks to the bullish thesis include the November midterm elections, federal deficit pressures, and higher interest rates. In commercial aviation, Guggenheim favors new aircraft production suppliers like Howmet Aerospace and Hexcel, but expects aftermarket demand to weaken due to slower passenger traffic growth of just 1.8% in 2026.