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Playing for the Real Money in Homeland Defense

Lockheed, with its shares down 0.8% in the past year, has the relatively weakest stock of the trio. That compares with a nearly 37% jump enjoyed by Accenture and a 13.5% increase in Computer Sciences shares. For that reason, some analysts are bullish on Lockheed, calling the world's largest defense contractor's shares undervalued.

Shares of Lockheed were up 38 cents, or 0.79%, to $48.61 in recent trading Wednesday; Accenture shares were down 17 cents, or 0.72%, to $23.56; and shares of Computer Sciences were up 11 cents, or 0.26%, to $42.80.

On Tuesday, Legg Mason analyst Troy Lahr initiated coverage on Lockheed with a buy rating and included it on the firm's list of compelling ideas. Lahr noted that the stock is trading at an enterprise value-to-earnings ratio of 8, below the median multiple of the S&P 500 of 11.

Last month, meanwhile, Jefferies analyst Sam Pearlstein noted that several near-term contract competitions, including US-Visit, will determine whether Lockheed will have to raise 2005 revenue and earnings guidance in July, when it reports its second-quarter results. He has a buy rating on the stock and his firm hasn't done any banking with Lockheed.

Ultimately, though, the US-Visit contract would be most important to Computer Science's future, analysts said.

"CSC, I think, has less significant long-term prospects in its commercial consulting and outsourcing business, whereas Accenture has more opportunity in consulting and business-process outsourcing that makes it less reliant on winning these large federal contracts," said Bernstein analyst Rod Bourgeois, who has an outperform rating on Accenture and market perform rating on Computer Sciences.

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