In this article, we discuss 11 best aerospace stocks to buy. If you want to see more stocks in this selection, check out 5 Best Aerospace Stocks To Buy.
Economic recovery for the aerospace and defense sector gained momentum in 2022 on the back of increasing demand for air travel. As per an outlook survey by Deloitte, 88% of senior executives noted that the business outlook for the aerospace and defense industry in 2023 is “somewhat to very positive.” The reasons for their optimism included developments in new technologies and segments like advanced air mobility, evolution of business models and greater exploration of space, and the use of digital thread and smart factories.
According to Fitch Ratings, the Aerospace & Defense outlook is improving, and feasible demand patterns should result in growing cash flows and deleveraging capacity starting in 2023. Fitch thinks commercial aircraft manufacturers and suppliers will be beneficiaries of robust global demand for new aircraft fleets as world travel recovers to pre-pandemic levels, despite the current recessionary threats looming ahead.
Fitch sees deliveries of new large commercial aircrafts increasing by over 20% as compared to 2022, resulting in greater free cash flow and financial freedom for OEMs. Production rates should remain comparatively normal during the first half of next year, but could heighten towards the end of 2023. The aerospace industry is well positioned for long-term growth as the geopolitical environment remains unstable and defense capabilities around the world are being strengthened. Some of the best aerospace stocks to invest in include Northrop Grumman Corporation (NYSE:NOC), Lockheed Martin Corporation (NYSE:LMT), and Raytheon Technologies Corporation (NYSE:RTX).
Our Methodology
We selected the following aerospace stocks based on positive analyst coverage, strong business fundamentals, and market visibility. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022. The list is arranged according to the number of hedge fund holders in each firm.
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Best Aerospace Stocks To Buy
11. AeroVironment, Inc. (NASDAQ:AVAV)
Number of Hedge Fund Holders: 18
AeroVironment, Inc. (NASDAQ:AVAV) is headquartered in Arlington, Virginia, and the company designs, develops, delivers, and supports robotic systems for government agencies and businesses in the United States and internationally. The company operates through four segments – Unmanned Aircraft Systems, Tactical Missile System, Medium Unmanned Aircraft Systems, and High Altitude Pseudo-Satellite Systems.
On December 7, Canaccord analyst Austin Moeller raised the price target on AeroVironment, Inc. (NASDAQ:AVAV) to $106 from $105 and maintained a Buy rating on the shares. The analyst noted that Q3 revenues missed his estimates due to an unfeasible mix and an impact on gross margins from $4 million in amortization of intangibles but the company lifted its 2023 top-line guidance on the back of high demand for both the Puma Small UAS and the Switchblade 300 and 600 loitering munitions.
According to Insider Monkey’s data, AeroVironment, Inc. (NASDAQ:AVAV) was part of 18 hedge fund portfolios at the end of the third quarter of 2022, up from 10 in the prior quarter. Cathie Wood’s ARK Investment Management is the largest stakeholder of the company, with 750,191 shares worth $62.5 million.
Like Northrop Grumman Corporation (NYSE:NOC), Lockheed Martin Corporation (NYSE:LMT), and Raytheon Technologies Corporation (NYSE:RTX), AeroVironment, Inc. (NASDAQ:AVAV) is one of the best aerospace stocks to invest in.
10. Woodward, Inc. (NASDAQ:WWD)
Number of Hedge Fund Holders: 19
Woodward, Inc. (NASDAQ:WWD) is a Colorado-based company that designs, manufactures, and services control solutions for the aerospace and industrial markets worldwide. Woodward, Inc. (NASDAQ:WWD)’s Aerospace segment provides fuel pumps, metering units, actuators, air valves, specialty valves, fuel nozzles, thrust reverser actuation systems, flight deck controls, actuators, servocontrols, motors, and sensors for aircrafts. Woodward, Inc. (NASDAQ:WWD) is one of the best aerospace stocks to invest in.
On November 17, Woodward, Inc. (NASDAQ:WWD) reported a Q3 non-GAAP EPS of $0.84 and a revenue of $640 million, outperforming Wall Street estimates by $0.10 and $13.45 million, respectively. The company expects total net sales for fiscal 2023 to be between $2.60 billion and $2.75 billion, versus a consensus of $2.37 billion. Aerospace sales growth percentage is forecasted to be between 14%-19%. Woodward, Inc. (NASDAQ:WWD) expects earnings per share to be between $3.15 and $3.60.
Truist analyst Michael Ciarmoli on November 18 raised the price target on Woodward, Inc. (NASDAQ:WWD) to $88 from $80 but kept a Hold rating on the shares. The company’s Q3 revenue outperformed expectations and its FY23 guidance was better than consensus but high interest, incentive comp, weak industrial margins, and R&D expense drove worse than anticipated earnings and free cash flow outlook, the analyst told investors in a research note.
According to Insider Monkey’s Q3 data, 19 hedge funds were long Woodward, Inc. (NASDAQ:WWD), compared to 18 funds in the earlier quarter. Boykin Curry’s Eagle Capital Management is the largest position holder in the company, with 4.3 million shares worth $348 million.
Here is what Carillon Eagle Small Cap Growth Fund has to say about Woodward, Inc. (NASDAQ:WWD) in its Q1 2022 investor letter:
“Woodward (NASDAQ:WWD) develops and produces control systems and energy conversion solutions and components for the aerospace and industrial end markets. The company’s stock was a strong performer in the quarter, as the end markets it serves began recovering in the second half of 2021 from a COVID-induced slowdown. Woodward’s relatively high exposure to narrow-body commercial jets should be a positive in the near-term, as narrow-body manufacturing, along with the demand for Woodward’s aftermarket components, is seeing a quicker recovery and is a growing share of the total fleet over their wide-body counterparts. Current energy and power demand is driving growth in power generation, as well as oil, gas, and alternative fuels, which has benefited the industrial side of the business.”
9. Hexcel Corporation (NYSE:HXL)
Number of Hedge Fund Holders: 21
Hexcel Corporation (NYSE:HXL) was founded in 1946 and is headquartered in Stamford, Connecticut. The company develops, manufactures, and markets structural materials for use in commercial aerospace, space and defense, and industrial markets. It operates through two segments, Composite Materials and Engineered Products. Hexcel Corporation (NYSE:HXL) expects EPS for full-year 2022 of $1.12-$1.24 versus the prior guidance of $1.00-$1.24, which is still in line with the $1.23 analyst consensus, but narrowed full-year revenue guidance to $1.53 billion-$1.6 billion from $1.50 billion-$1.63 billion previously. However, the new revenue guidance is still in line with the $1.59 billion consensus.
BMO Capital analyst John McNulty on November 1 maintained a Market Perform rating on Hexcel Corporation (NYSE:HXL) and lowered the firm’s price target on the shares to $61 from $66. The company’s Q3 results were “more modest than expected”, but its earnings recovery from the COVID-19 lows continues to improve, the analyst told investors in a research note.
According to Insider Monkey’s third quarter database, 21 hedge funds were long Hexcel Corporation (NYSE:HXL), compared to 25 funds in the prior quarter. Dmitry Balyasny’s Balyasny Asset Management is the largest stakeholder of the company, with 1.05 million shares worth $54.5 million.
Here is what LRT Capital Management has to say about Hexcel Corporation (NYSE:HXL) in its Q1 2022 investor letter:
“Hexcel manufactures carbon fiber composite materials with the primary end markets being aerospace and defense. The company’s stock price was hit heavily last year due to the decline in the aerospace market, but the stock is making an impressive comeback this year as the outlook for travel and aerospace demand improves. The near-term demand for lightweight, high-performance carbon fiber composites is still uncertain, but the longer-term trend is clearly very strong. As airplane manufacturers look to improve the fuel efficiency and performance of their planes, the primary way of doing this is to reduce weight. The 787, 777X and A350 are just the most recent examples of planes from Boeing and Airbus that utilize an increasing amount of carbon fiber materials in their construction. Just as is the case with Marriott, we do not view recent results as meaningful or indicative of a long-term trend, but rather a once in a century aberration due to the Covid-19 pandemic. Once Covid-19 recedes, we expect the demand for more fuel-efficient planes to return rather quickly, powering the demand for the company’s light weight carbon composites.”
8. Textron Inc. (NYSE:TXT)
Number of Hedge Fund Holders: 28
Textron Inc. (NYSE:TXT) was founded in 1923 and is headquartered in Providence, Rhode Island. The company operates in the aircraft, defense, industrial, and finance businesses. Textron Inc. (NYSE:TXT)’s Aviation segment manufactures, sells, and services business jets, turboprop and piston engine aircrafts, military trainers, and defense aircrafts. It is one of the premier aerospace stocks to invest in.
On December 5, Jefferies analyst Sheila Kahyaoglu noted that the $80 billion future long-range assault aircraft program, awarded to Textron Inc. (NYSE:TXT)’s Bell V-280 by the U.S. Army, could be a “$66 billion revenue generator through 2050”, adding $11 to Textron Inc. (NYSE:TXT) stock’s net present value. The analyst also contended that its V-280 tilt rotor is a “structurally better aircraft” as the decision to award the contract to Textron Inc. (NYSE:TXT) came despite the “very strong” showing from Lockheed Martin’s Sikorsky team.
According to Insider Monkey’s data, 28 hedge funds were long Textron Inc. (NYSE:TXT) at the end of the third quarter of 2022, compared to 23 funds in the prior quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is the leading position holder in the company, with 3.18 million shares worth $185.7 million.
7. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders: 35
General Dynamics Corporation (NYSE:GD) is a Virginia-based aerospace and defense company. It runs through four segments – Aerospace, Marine Systems, Combat Systems, and Technologies. The Aerospace segment designs, manufactures, and sells business jets, offers aircraft maintenance and repair, charter, aircraft-on-ground support and completion, staffing, and fixed-base operator services. General Dynamics Corporation (NYSE:GD) is one of the leading aerospace stocks to invest in.
On December 7, General Dynamics Corporation (NYSE:GD) declared a $1.26 per share quarterly dividend, in line with previous. The dividend is payable on February 10, 2023 to shareholders of record on January 20. The dividend yield on December 20 came in at 2.06%.
Citi analyst Jason Gursky initiated coverage of General Dynamics Corporation (NYSE:GD) on December 8 with a Buy rating and a $298 price target. The growth outlook for the aerospace segment is optimistic, given recent order trends and a backlog level that provides earnings visibility for the next several years, the analyst wrote in a research note.
According to Insider Monkey’s data, 35 hedge funds were long General Dynamics Corporation (NYSE:GD) at the end of September 2022, compared to 42 funds in the prior quarter. James A. Star’s Longview Asset Management is the biggest position holder in the company, with 30 million shares worth $6.3 billion.
Here is what Oakmark Global Fund has to say about General Dynamics Corporation (NYSE:GD) in their Q1 2021 investor letter:
“The second new U.S. equity purchase was General Dynamics, a leading U.S. defense contractor and owner of the world’s premier business jet franchise (Gulfstream). We were able to purchase this high-quality and durable business at a meaningful discount to our estimate of its intrinsic value after a series of near-term concerns hurt its share price. Taking a longer term view, the company’s business jet franchise should benefit from a multi-year investment program in new, differentiated products. Also, its free cash flow conversion is set to improve materially and the company is poised to benefit from a highly visible ramp up in revenue related to next generation nuclear-powered submarines. As these positives come into clearer view, we expect sentiment to improve, along with the company’s share price.”
6. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 42
The Boeing Company (NYSE:BA) was incorporated in 1916 and is based in Chicago, Illinois. The company designs, develops, manufactures, sells, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and related services worldwide. The company operates through four segments – Commercial Airplanes, Defense, Space & Security, Global Services, and Boeing Capital. On December 16, The Boeing Company (NYSE:BA) received the biggest order for commercial aircraft in history as United Airlines Holdings, Inc. (NASDAQ:UAL) agreed to buy 100 twin-aisle 787 Dreamliners, with an option to buy 100 more. The carrier also will buy 100 of Boeing’s 737 MAX single-aisle jets.
Susquehanna analyst Charles Minervino raised the price target on The Boeing Company (NYSE:BA) on December 14 to $217 from $185 and kept a Positive rating on the shares. The analyst updated his model to factor in November’s order and delivery data. He remains optimistic as high profile orders provide further evidence of a solid commercial aerospace demand outlook.
According to Insider Monkey’s data, 42 hedge funds were bullish on The Boeing Company (NYSE:BA) at the end of Q3 2022, compared to 51 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is a prominent stakeholder of the company, with 1.5 million shares worth $178.5 million.
In addition to Northrop Grumman Corporation (NYSE:NOC), Lockheed Martin Corporation (NYSE:LMT), and Raytheon Technologies Corporation (NYSE:RTX), elite investors are piling into The Boeing Company (NYSE:BA) for exposure to the aerospace industry.
Meridian Funds made the following comment about The Boeing Company (NYSE:BA) in its Q3 2022 investor letter:
“We similarly remained invested in largely out-of-favor The Boeing Company (NYSE:BA) , a global leader in developing and producing commercial jet aircraft. Due to some self-inflicted wounds and a bit of bad luck, as well as dramatic declines in air travel early in the pandemic, investor sentiment for this company has simply been awful. As part of our contrarian thinking, however, we view the business as critical to global transportation needs and see multiple catalysts to improve sentiment. In addition to the current surge in air travel worldwide, ramped up production of the 737 MAX aircraft and the pending restart of 787 Dreamliner deliveries should help turn broader sentiment. Additionally, we anticipate a meaningful inflection in cash flow as Boeing starts delivering aircraft currently in storage as well as the eventual expansion of its production in both core platforms.”
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Disclosure: None. 11 Best Aerospace Stocks To Buy is originally published on Insider Monkey.
