Citigroup Sticks by Three Missile and Defense Companies as Iran War Rages

Why It Matters

The reaffirmed buy ratings underscore robust growth prospects for U.S. defense firms as geopolitical tensions drive higher government spending on missile and counter‑drone capabilities.

Key Takeaways

• Citi maintains buy ratings on Karman, L3Harris, RTX.
• Karman price target $125, 28% upside, YTD +33%.
• L3Harris base case $418, 17% upside, $1B Pentagon investment.
• RTX stays buy as missile defense demand rises.
• Drone and missile threats boost U.S. defense spending.

Pulse Analysis

The renewed focus on missile and drone defense comes as the U.S.-Israeli campaign against Iran intensifies, prompting policymakers to allocate additional resources toward counter‑UAS and missile interception capabilities. While recent data suggest a modest decline in Iranian strike frequency, the underlying threat perception remains high, sustaining demand for advanced propulsion, launch systems, and munition replenishment. This environment has sharpened investor attention on defense equities that stand to benefit from sustained government contracts and heightened geopolitical risk.

Karman Holdings, a recent public entrant, exemplifies the sector’s growth trajectory. With a $125 price target representing a 28% upside, Karman’s YTD share surge of 33% reflects strong market confidence in its aerodynamic interstage and propulsion technologies. The company’s new Utah facility, dedicated to high‑volume loitering missile and counter‑UAS launch production, positions it to capture expanding Pentagon orders. Meanwhile, L3Harris Technologies enjoys a $418 base‑case target, translating to roughly 17% upside, bolstered by a $1 billion convertible preferred equity infusion from the Pentagon aimed at scaling solid‑rocket‑motor output. The planned IPO of its rocket‑motor business later in 2026 adds a liquidity catalyst for investors.

RTX, long a staple in the defense arena, continues to benefit from the same megatrends driving its peers. Persistent concerns over drone swarms and missile proliferation are fueling multi‑year procurement programs across the U.S. and allied forces. As defense budgets prioritize resilient missile defense architectures, companies with integrated solutions—ranging from radar to interceptor missiles—are poised for earnings acceleration. For investors, the convergence of geopolitical risk, fiscal support, and technological innovation creates a compelling case for maintaining exposure to these high‑growth defense assets.