4 Aerospace & Defense Stocks That Will Rally 40% or More, According to Wall Street

The global aerospace and defense sector suffered considerably amid the worst of the COVID-19 pandemic as numerous deals were shelved and significant logistical hurdles presented themselves. However, Russia’s invasion of Ukraine has led to record gains in this segment, with nations placing renewed emphasis on…

defense budgets. For example, Germany recently committed an additional 100 billion euros ($112.70 billion) to fund its armed services.

Furthermore, with the development of complex international diplomatic ties, the demand for military equipment modernization is expected to rise, benefiting the aerospace and defense industry. According to Report Linker, the global aerospace & defense market is slated to expand at an C8.5% CAGR of 8.5% until 2026.

Investors’ interest in the aerospace and defense space is evident in the iShares U.S. Aerospace & Defense ETF’s (ITA) 5.4% returns in the past three months versus the SPDR S&P 500 ETF Trust’s (SPY) 8.4% decline. Given this backdrop, Wall Street analysts expect fundamentally strong aerospace and defense stocks, The Boeing Company (BA – Get Rating), Spirit AeroSystems Holdings, Inc. (SPR – Get Rating), Embraer S.A. (ERJ – Get Rating), and CPI Aerostructures, Inc. (CVU – Get Rating) to deliver significant upside in the coming months.

The Boeing Company (BA – Get Rating)

BA designs, develops, manufactures, sells, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, launch systems, and services worldwide. The Chicago-based company has four segments: Commercial Airplanes; Defense, Space & Security; Global Services; and Boeing Capital.

On Jan. 26, 2022, David Calhoun, BA President and CEO, said, “We increased 737 MAX production and deliveries and safely returned the 737 MAX to service in nearly all global markets. As the commercial market recovery gained traction, we generated robust commercial orders, including record freighter sales. Demonstrating progress in our overall recovery, we also returned to generating positive cash flow in the fourth quarter.”

BA’s loss from operations came in at $4.17 billion for the fourth quarter, ended Dec. 31, 2021, versus a $8.05 billion loss in the prior period, while its net loss came in at $4.14 billion compared to an $8.42 billion loss in the previous period. Also, its loss per share was $7.02, versus a  $14.65 loss per share in the year-ago period.

Analysts expect BA’s revenue to grow 31.7% year-over-year to $82 billion in 2022. Its EPS is estimated to increase 133.6% to $3.17 in 2022. The stock closed yesterday’s trading session at $178.56. Wall Street analysts expect the stock to hit $256.56 in the near term, which indicates a potential 43.7% upside..

Spirit AeroSystems Holdings, Inc. (SPR – Get Rating)

SPR designs, engineers, manufactures and markets commercial aerostructures worldwide. It has three segments: Commercial; Defense & Space; and Aftermarket. It is one of the world’s largest manufacturers of aerostructures for commercial airplanes, defense platforms, and business/regional jets. SPR is headquartered in Wichita, Kans.

On Feb. 2, 2022, Tom Gentile, SPR President, and CEO, said, “We successfully managed the company through another challenging year due to the COVID-19 pandemic. Our free cash flow was in line with our guidance of $(200) to $(300) million. We also made substantial progress on our diversification efforts, as highlighted by the announcement of new reporting segments and a new organizational structure.”

For the fourth quarter, ended Dec. 31, 2021, SPR’s total segment revenues came in at $1.07 billion, up 22.1% year-over-year. Its net loss was  $120.30 million, compared to a $295.90 million loss in the previous period. Its loss per share came in at $1.15, compared to a $2.85  loss per share in the year-ago period.

SPR’s revenue is expected to be $6.54 billion in fiscal 2023, representing a 30.6% year-over-year rise. The company’s EPS is expected to increase by 484.6% to $2.5 in 2023. Over the past six months, the stock has gained 9.8% in price to close yesterday’s session at $42.66. Wall Street analysts expect the stock to hit $60.67 in the near term, which indicates a potential upside of 42.2%.

Embraer S.A. (ERJ – Get Rating)

Headquartered in  São José dos Campos, Brazill, ERJ designs, develops, manufactures, and sells aircraft and systems in Brazil, North America, Latin America, the Asia Pacific, Brazil, Europe, and internationally. It operates through Defense and Security; Executive Jets; Service & Support; and Other segments.

On Jan. 26, 2022, ERJ  reintegrated its commercial aviation business’ main information technology systems and processes. Antonio Carlos Garcia, Executive Vice President of Finance and Investor Relations, said…

 

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