Sector Snap: Military contractors climb

Scott Ellison of Friedman, Billings, Ramsey in a note said the stocks should trade higher based on strong order flow, third quarter earnings and the possibility that the fiscal 2009 defense appropriations bill is passed.

"Many defense names are currently undervalued in our opinion, and we believe investors should take advantage of this discount and potential near-term upside by levering themselves to companies with Army, Intelligence Surveillance Reconnaissance, and international exposure," the analyst said.

Military contractor stocks have largely priced in a presidential victory by Democratic Party nominee Sen. Barack Obama, Ellison said.

He said companies "levered to the Army stand to benefit," include Alliant Tech Systems Inc., L-3 Communications Holdings Inc., AeroVironment Inc., FLIR Systems Inc. and General Dynamics Co.

In morning trading, shares of Alliant rose $1.01 to $105.28, while L-3 shares added 61 cents to $104.71. AeroVironment slipped 42 cents to $33.43, and FLIR Systems climbed 13 cents to $36.74. General Dynamics advanced $1.14 to $93.45.