We recently compiled a list of the 11 Best Aerospace and Defense Stocks to Buy Right Now. In this article, we are going to take a look at where The Boeing Company (NYSE:BA) stands against the other best aerospace and defense stocks to buy.
How Did The Aerospace And Defense Sector Perform in Q3 2024?
According to a report by Dinan Capital Advisors, the aerospace and defense industry’s EBITDA multiples increased by around 8% on average during the third quarter of 2024. Within the industry, the Maintenance, Repair, and Overhaul (MRO) segment stood out with the highest EBITDA multiple of more than 19%. The robust performance in the sector was driven by increased government spending, AI defense implementation, and increased global travel. As per the report, the global market size of the aerospace and defense sector is estimated to grow from $1 trillion to around $1.5 trillion during the next decade.
There are various factors contributing to growth within the industry. Firstly, the defense sector is experiencing significant expansion due to the ongoing conflicts in the Middle East and Ukraine. This rising defense demand resulted in a record defense order backlog of $747 billion, indicating an 11% increase year-over-year. Moreover, the Senate Armed Services Committee has projected that Congress will finalize the FY25 US defense budget at approximately $833 billion, exceeding last year’s spending limits.
In addition to increased defense spending, which is one segment of the overall aerospace and defense industry, international air traveling is also improving. According to a report by FlightGlobal, the global passenger traffic grew by 7.4% subsequently during the third quarter. Although the profitability of the global airline industry is still down by around $1.7 billion year-over-year, the subsequent growth in passengers indicates an ongoing recovery.
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Mitchell Reiss, American diplomat and distinguished fellow at the Royal United Services Institute appeared on a CNBC interview on November 7 to discuss how the defense sector will perform under President-elect Donald Trump. He said that the United States government is expected to increase its defense spending under President Donald Trump. Currently, defense spending is at its lowest level since 1998 and the geopolitical situation is more dangerous than the said year. Reiss thinks that the president will double down on some of the initiatives from his first term. Trump sees China as a United States adversary and he sees Israel and Saudi Arabia as stabilizing forces in the Middle East and will want to build upon the Abraham Accords. He also thinks that the president will call upon its European allies to increase defense spending.
While Reiss expects the United States’ defense spending to increase, he also noted that a third of the NATO countries are still not hitting the 2% mark in terms of their defense spending. Considering the geopolitical tensions between Russia and Ukraine, European countries would also naturally pivot towards increasing their defense spending. Reiss believes that if someone is interested in defense stocks there is a lot of growth potential within the industry.
Our Methodology
To curate the list of the 11 best aerospace and defense stocks to buy right now, we used the Finviz stock screener. Using the screener we aggregated a list of companies working in the aerospace and defense industry and sorted them by market capitalization. Next, we sourced the number of hedge funds holding each company from Insider Monkey’s Q3 2024 database. The list is ranked in ascending order of the number of hedge funds.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 52
The Boeing Company (NYSE:BA) is a leading American aerospace and defense corporation that specializes in the design, production, and sale of aircraft, rotorcraft, rockets, satellites, telecommunications equipment, and missiles globally. It operates through three main business segments including Commercial Airplanes, Defense, Space, and Security, and Global Services.
The Boeing Company (NYSE:BA) is currently navigating a challenging period but has several factors that could lead to a recovery, making it one of the best aerospace and defense stocks to buy right now. The company reported a significant net loss of $6.17 billion in Q3 2024, contributing to nearly $8 billion in total losses for the year so far. This has raised concerns among investors about the company’s financial health. Moreover, the company has also faced ongoing supply chain disruptions and production slowdowns, particularly with its 737 MAX and other aircraft models. These issues have been exacerbated by a recent seven-week labor strike that halted production on key programs.
However, on the bright side, its backlog is valued at approximately $500 billion, which represents more than seven years of expected sales based on 2024 projections. This backlog includes numerous orders for commercial aircraft, indicating strong future demand. Moreover, the appointment of Kelly Ortberg as CEO is seen as a pivotal move. He aims to reset investor expectations and improve operational processes, particularly within Boeing’s defense segment, which has struggled with project estimations.
Fidelity Dividend Growth Fund stated the following regarding The Boeing Company (NYSE:BA) in its Q3 2024 investor letter:
“Overweighting The Boeing Company (NYSE:BA) also worked against the fund. The stock returned about -16% the past three months, sliding considerably in late July, as Q2 financial results for the aerospace giant came up well short of Wall Street’s expectations amid bigger-than-anticipated losses in both its commercial aviation and defense businesses. In July, the firm named former Rockwell Collins CEO Kelly Ortberg as its new president and CEO in an effort to move past ongoing production issues, cost overruns and delivery delays.”
Overall, BA ranks 6th on our list of best aerospace and defense stocks to buy right now. While we acknowledge the potential of BA to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.