Citigroup (NYSE:C) Likes Lockheed (LMT), General Dynamics (GD), Northrop Grumman (NOC), Raytheon (RTN), Boeing (BA), Goodrich (GR), Precision Castpar

Being more positive on aerospace and defense than its colleagues, Citigroup (NYSE:C) said they see Lockheed (NYSE:LMT), General Dynamics (NYSE:GD), Northrop Grumman (NYSE:NOC), Raytheon (NYSE:RTN), Boeing (NYSE:BA), Goodrich (NYSE:GR), Precision Castparts (NYSE:PCP) benefiting from the current spending environment in the sectors.

Citi said, “We think investors are pricing zero to negative growth into defense stocks indefinitely. In a nutshell: The DoD has to spend money to refresh and update equipment.”

The giant bank sees defense moving away from R&D spending and moving spending to the procurement of existing weapon systems. That could boost margins for companies serving the sector, said Citigroup analysts Jason Gursky and Jonathan Raviv.

They also noted that companies could also focus more on selling to foreign and adjacent markets, boosting earnings there as well.

The analysts say stocks in the two sectors are trading at historically low valuations. Measured by earnings over the next 12 months, the companies are trading at 0nly 9 times expectations, below the 10 to 15 times in the past. The 9 times earnings is 35 percent below the broader market.