Deutsche Bank Confident In Defense Regardless Of Election Results

"The mood amongst the presenting companies and 1x1s was upbeat, despite election uncertainty. Though the message on international wasn't consistent (LLL management saw international as a zero sum game), the optimism on a US inflection from defense spending was universal," analyst Myles Walton wrote in a note.

According to a note from Walton, commentary from investors indicate there was a desire to own more defense. "Despite valuation expansion (5–10 percent premium to the S&P, though more in-line with cash flow)," the analyst said "the relative difference of the sector fundamentals versus rest of the market were compelling."

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On the valuation front, Walton sees commercial aero multiples at 16.1x 2016 EPS (14.5x 2017e EPS) as reasonable given backlog and production rate visibility which should lead to moderate top line growth and near double digit earnings growth in the nearer term.

"Defense multiples are in-line to slightly ahead of the market which seems to be causing heart-burn for some investors, though the budgetary inflection supports our view that these stocks are as valuable-if not more so-than the overall market," Walton added.

Walton raised the price target of Triumph Group Inc TGI to $45 from $40. He cut the price target of Embraer SA (ADR) ERJ to $30 from $33.

The analyst modestly raised his 2017 EPS estimate for Curtiss-Wright Corp. CW to $4.58 from $4.53. Walton also hiked the price target to $95 from $89.

Walton also raised his 2017 EPS view for L-3 Communications Holdings, Inc. LLL to $8.65 from $8.48 and raised the price target to $160 from $150.