While the stock market is heavily hit by the trade war this year, there is an industry that is almost immune to the trade war – Aerospace & Defense Industry. Following are trends and reasons to choose Aerospace & Defense stocks as a stock watch target:
Outlook for aerospace and defense market is $8.7 trillion over the next 10 years
Boeing forecasts a $9.1 trillion market for commercial aviation market with annual growth of 4%
The commercial aircraft order backlog is at its peak. 38,000 aircraft are expected to be produced globally over the next 20 years.
A steady improvement in global air traffic has pushed up commercial airplane demand. Air passenger numbers are likely to double to 8.2 billion in the next 10 years.
Political tensions are continuing to intensify and demand for military equipment is on the uptick. Defense spending across the globe is growing tremendously.
$738 billion to be splashed on USA military spending in 2020
The United States is the largest supplier of defense products
Aerospace & Defense services & products are not impacted by trade war
In September 2019, S&P 500 aerospace and defense subsector had outperformed the entire S&P 500 Index. So far in 2019, the A&D subsector has returned 22%.
Following are some key players in Aerospace & Defense Industry with a strong outlook:
TransDigm and Northrop Grumman do not focus on sales in the Asian region. The impact by the trade war is at a minimum.
General Dynamics, AeroVironment, Axon Enterprise, Northrop Grumman all have >20% sales growth in the past 12 months
Analysts have 75% to 100% “Buy” rating on Cubic Corp, ESCO Technologies, AAAR Corp, Moog Inc. Class A, Northrop Grumman, Boeing.
Huntington Ingalls has a $22 billion backlog that will continue to grow given the ongoing needs of US Navy
30%-50% stock growth in Leidos, L3, Lockheed Martin, Northrop Grumman, Science Applications in 2019
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