At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

There's best, there's worst, and then there's Macquarie
Once again, we're taking a quick break from the ordinary today, Fools. While it's my usual practice to highlight high-profile U.S. stockbrokers in this column, every so often we get a chance to step outside our borders and get a reality check from a non-U.S. perspective. That opportunity arrived this week, when Australian equity analyst Macquarie Research weighed in on prospects for three of the biggest names in U.S. defense contracting:, Lockheed Martin (NYSE:LMT), Raytheon (NYSE:RTN), and L-3 Communications (NYSE:LLL)

Let's go to the tape
"Macquarie." It's hardly a household name (and as I pointed out back in May, it's unlikely ever to become one so long as Macquarie declines to provide data on its ratings to information clearinghouse Briefing.com). But it might be a name you want to get to know.

When last we profiled this firm, it was busily handing out "buy" ratings to U.S. aerospace firms like Boeing (NYSE:BA), Honeywell International (NYSE:HON), Spirit Aerosystems (NYSE:SPR), and United Technologies (NYSE:UTX). And wouldn't you know it -- every single one of these stocks then proceeded to beat the market.

That's a pretty ill omen for the three defense picks getting panned by Macquarie this week -- and I have to admit, it's a bit of a shocker for yours Fool-y. After all, I put both Lockheed and Raytheon in my Defense Portfolio a few months back; now Macquarie's telling us to sell the one, and only hold the other. Just last week, I named L-3 as my dark horse candidate for profiting from the Afghan Surge ... and here comes Macquarie again, saying the stock's a sell.

What gives?
What's got these Down Under-analysts so down on U.S. Defense, Inc.? Macquarie tells us to "expect the U.S. defense budget, particularly the investment accounts, to remain under pressure in coming years," hamstringing the companies' ability to grow. Meanwhile, a nascent recovery in industrial markets elsewhere has Macquarie thinking investors will begin seeking better growth prospects elsewhere.

Foolish takeaway
Is Macquarie right? Will investors turn away from defense contractors, in search of greener pastures (and profits) elsewhere? Very likely so. Macquarie certainly proved prescient the last time it opined on the prospects for these kinds of companies. Still, I'd pause before panicking at these downgrades.

Why? Because valuation matters -- on the downside as well as the up. Macquarie tells us we should be selling both Lockheed and L-3, but with each stock selling for just 10 times earnings, and projected to grow at roughly 9% per year over the next half decade, I just don't see a whole lot of risk to the stock prices at these levels. (In fact, if there's any stock in the trio that carries more risk than most, you'd have to say it was Raytheon, which sells for a P/E about 10% pricier than its peers despite having similar growth prospects.)

But the truth of the matter is that not one of these three stocks looks particularly pricey today. And paying respectable dividends as they do -- ranging from 1.7% at L-3 Communications all the way up to a generous 3.2% yield at Lockheed -- I think the Foolish thing to do now is calmly cash your dividend checks, and wait for the pessimism to pass.

Spirit AeroSystems Holdings is a Motley Fool Hidden Gems recommendation. Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 904 out of more than 145,000 members. The Motley Fool has a disclosure policy.