The aerospace industry has been rebounding from the pandemic-induced disruptions, with companies rearranging their operations and looking for innovative ways to capture maximum aftermarket value. The global aerospace & defense industry is expected to grow from $700.30 billion in 2021 to $755.24 billion in 2022 and is likely to reach $1.05 trillion in 2026, at a CAGR of 8.5%.
Moreover, increased focus on advanced manufacturing technologies, deployment of innovative digital thread and smart factories to drive efficiencies and customer experiences, and evolving business models are expected to be significant growth drivers for the industry.
Furthermore, the U.S. House of Representatives has passed the FY2023 National Defense Authorization Act, which sets the funding levels, expenditures, and authorizations for the Department of Defense, and should boost the aerospace industry.
Given this backdrop, fundamentally sound stocks L3Harris Technologies, Inc. (LHX) and Lockheed Martin Corporation (LMT) could be quality additions to one’s portfolio. However, the industry is yet to return to its pre-pandemic highs. And we think it could be wise to avoid The Boeing Company (BA), considering its bleak financial positioning.
Stocks to Buy:
L3Harris Technologies, Inc. (LHX)
LHX, an aerospace and defense technology company, provides mission-critical solutions for government and commercial customers worldwide.
On June 30, LHX announced that its newly launched infrared space instrument would significantly improve the ability to capture high-resolution imagery and other important battlefield information from space, along with providing better sensitivity and target discrimination at a lower cost. This is expected to enhance the nation’s future missile defense capability.
LHX’s net income increased 1.9% year-over-year to $475 million in the fiscal first quarter ended April 1, 2022. Its net income per share grew 8.4% from the year-ago value to $2.44.
The consensus EPS estimate of $3.51 for the fiscal quarter ending September 2022 represents a 9.4% year-over-year improvement. The consensus revenue estimate of $4.45 billion for the same quarter represents a 5.2% increase from the same period last year. LHX also beat the consensus EPS estimates in all the trailing four quarters.
LHX has gained 5% year-to-date to close the last trading session at $223.84.
LHX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
LHX also has a B grade in Quality. It is ranked #13 of 77 Air/Defense Services industry stocks.
Beyond what is stated above, we’ve also rated LHX for Growth, Momentum, Stability Sentiment, and Value. Get all the LHX ratings here.
Lockheed Martin Corporation (LMT)
LMT, a security and aerospace company, engages in the research, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. It operates through four segments, Aeronautics; Missiles and Fire Control; Rotary and Mission Systems; and Space.
LMT’s operating profit from the space segment increased 7.9% year-over-year to $245 million in the fiscal quarter ended March 27, 2022, while its total assets grew 1.3% quarter-over-quarter to $51.51 billion.
LMT’s revenue for the fiscal quarter ending September 2022 is expected to improve 4.9% year-over-year to $16.82 billion. Also, the company surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
LMT’s shares have gained 6.9% over the past six months and 12.1% year-to-date to close the last trading session at $398.38.
The company has an overall rating of B, translating to Buy in our proprietary rating system. LMT is also rated B in Value, Stability, and Quality. In the Air/Defense Services industry, it is ranked #14.
Click here for additional POWR Ratings for Growth, Momentum, and Sentiment for LMT.
Stock to Avoid:
The Boeing Company (BA)
BA designs, manufactures, sells, and services commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and services worldwide. The company operates through four segments, Commercial Airplanes; Defense, Space & Security; Global Services; and Boeing Capital.
For the fiscal quarter ended March 31, BA’s total revenues decreased 8.1% year-over-year to $13.99 billion. Loss from operations increased by 1,308.4% from the prior-year quarter to $1.17 billion. Net loss attributable to BA increased 127% from the same period the prior year to $1.22 billion, while its loss per share came in at $2.06, up 123.9% year-over-year.
Analysts expect BA’s EPS for the fiscal quarter ended June 2022 to come in at a negative $0.11. Also, the company’s EPS for the year ending December 2022 is expected to be negative $1.15. The company missed the consensus EPS estimates in three of the trailing four quarters.
The stock has declined 33.7% over the past year and 18.8% over the past three months to close its last trading session at $147.74.
BA’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, equating to Sell in our proprietary rating system.
BA also has a Stability, Sentiment, and Quality grade of D and a Growth grade of F. It is ranked #64 in the same industry. Click here to see the additional POWR Ratings for BA (Value and Momentum).
LHX shares were trading at $223.00 per share on Monday morning, down $0.84 (-0.38%). Year-to-date, LHX has gained 5.53%, versus a -17.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
2 Aerospace Stocks to Buy and 1 to Avoid Like the Plague StockNews.com
