On balance, Trump's social post about defense buybacks is positive: Jefferies' Kahyaoglu
Speakers
Sheila Kahyaoglu
— Senior Airlines Equity Research Analyst, Jefferies
Summary
CNBC's Power Lunch discussed defense stocks after Trump's social post suggested restricting dividends or buybacks until production ramps. Jefferies aerospace and defense analyst Sheila Kahyaoglu said the development is on balance positive for defense contractors, citing a proposed $500 billion budget increase, a strong global threat environment, and solid prime program execution. She continues to support Boeing for its commercial ramp and prefers Raytheon within defense, while noting General Dynamics for shipbuilding, Lockheed for missiles, and AeroVironment as a Buy-rated nimble name. She also said buyback/dividend restrictions could slightly reduce earnings power but may encourage more nimble defense entrants.
- Trump social post suggested limiting defense dividends or buybacks until production ramps.
- Jefferies' Sheila Kahyaoglu sees the post as on balance positive for defense contractors.
- She cites a proposed $500 billion defense budget bump, global threat environment, and international demand.
- Boeing is supported for its commercial production ramp and lack of buyback/dividend.
- Raytheon is her preferred defense play; General Dynamics and Lockheed are shipbuilding and missile plays.
- AeroVironment is highlighted with a Jefferies Buy rating; Firefly and Voyager are noted as recently public nimble names.
- She says buyback/dividend restrictions could slightly cut earnings power but may push contractors to be more nimble.
- Defense stocks had sharp intraday moves that she described as irrational.
Ideas
Defense contractors positive on budget, threat.
She views Trump's social post as on balance positive for defense contractors. The proposed $500 billion defense budget bump, even if not all in one year, plus a very positive global threat environment and international demand support the group. The no-dividend/no-buyback executive order is less damaging because none of the four major primes have contracts in terrible shape; Lockheed's F-35 deliveries rose to 191 in 2025, up about 60 units. Defense budgets are improving, though fiscal 2026 visibility is uncertain.
Boeing benefits from buyback limit, production ramp.
The executive order limiting buybacks and dividends is great for Boeing because Boeing does not have one, and Jefferies has been a big supporter and continues to support the company for its commercial production ramp.
Raytheon preferred play on international defense backlog.
Raytheon is her preferred play on the defense side. It has commercial aerospace exposure but primarily within defense, and 44% of its backlog is to international customers, where it tends to generate higher revenue. It is also a way to play missile spending, which is a priority area in the defense budget.
General Dynamics play on shipbuilding budget.
Defense budget spending is primarily in shipbuilding, and General Dynamics is the way to play that shipbuilding spending.
Lockheed exposed to missile budget growth.
Lockheed Martin is specifically exposed to missiles, a priority area of defense budget spending, and its F-35 deliveries improved to 191 aircraft in 2025 from the prior year, showing program execution is not in terrible shape despite relative underperformance.
Nimble defense newcomers may emerge and rise.
The buyback/dividend restrictions may push defense contractors to become more nimble, and the rise of Anduril plus recently public companies like Firefly and Voyager suggests more nimble defense companies may emerge as investable beneficiaries of the shift.
AeroVironment has Jefferies Buy rating.
AeroVironment is another example of a nimble defense company and Jefferies has a Buy rating on it, implying it should benefit as defense contractors become more nimble and new entrants rise.
