FBR Capital: Upcoming Opportunites within Commercial Aerospace
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Rating Summary:
2 Buy, 13 Hold, 1 Sell
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Today's Overall Ratings:
Up: 13 | Down: 9 | New: 16
Rating Summary:
2 Buy, 13 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 9 | New: 16
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FBR Capital: Upcoming Opportunites within Commercial Aerospace
FBR analyst says, "We think that the appetite for commercial aerospace stocks remains strong despite the recent pullback caused originally by the rising cost of oil and more recently by the weak jobs reports and negative GDP revisions. That being said, we think a shift in risk appetite is emerging with investors migrating towards more OEM exposure under the belief that higher (but not overwhelmingly high) oil will force the airlines to buy new aircraft versus upgrading some of their older, less fuel efficient aircraft in the fleet. With that as a backdrop we would buy some of the OEM levered names ahead of the Paris Airs Show, which kicks off at the of June. During the Air Show – as has been the historical trend – we expect for both Boeing and Airbus to announce fairly substantial bulk orders, which should be a catalyst for Goodrich (NYSE: GR) (Outperform), RTI International Metals (NYSE: RTI) (Outperform) and Spirit AeroSystems (NYSE: SPR) (Outperform)."
"Traffic. The most recent traffic and capacity results out of IATA illustrated significant improvement despite higher oil prices, the Japanese earthquake, and continued political unrest in the Middle East and North Africa, and were helped by higher demand from emerging markets as well as slightly easier year over year comparables. April’s global traffic grew +16.5% as both business travel and consumer travel seem to be picking up ahead of the busy summer season. Excluding the one month decline due to volcanic ash last year, this marks the twentieth straight month of increasing traffic. The current forecast for traffic growth is 4.7% for 2011 and we expect that 2012 will be another solid year. For the full year 2011, the recent demand shocks from Japan and the Middle East will likely result in a lower growth rate than originally expected, however we expect that the second half of 2011 into the first half of 2012 will be strong."
FBR analyst says, "We think that the appetite for commercial aerospace stocks remains strong despite the recent pullback caused originally by the rising cost of oil and more recently by the weak jobs reports and negative GDP revisions. That being said, we think a shift in risk appetite is emerging with investors migrating towards more OEM exposure under the belief that higher (but not overwhelmingly high) oil will force the airlines to buy new aircraft versus upgrading some of their older, less fuel efficient aircraft in the fleet. With that as a backdrop we would buy some of the OEM levered names ahead of the Paris Airs Show, which kicks off at the of June. During the Air Show – as has been the historical trend – we expect for both Boeing and Airbus to announce fairly substantial bulk orders, which should be a catalyst for Goodrich (NYSE: GR) (Outperform), RTI International Metals (NYSE: RTI) (Outperform) and Spirit AeroSystems (NYSE: SPR) (Outperform)."
"Traffic. The most recent traffic and capacity results out of IATA illustrated significant improvement despite higher oil prices, the Japanese earthquake, and continued political unrest in the Middle East and North Africa, and were helped by higher demand from emerging markets as well as slightly easier year over year comparables. April’s global traffic grew +16.5% as both business travel and consumer travel seem to be picking up ahead of the busy summer season. Excluding the one month decline due to volcanic ash last year, this marks the twentieth straight month of increasing traffic. The current forecast for traffic growth is 4.7% for 2011 and we expect that 2012 will be another solid year. For the full year 2011, the recent demand shocks from Japan and the Middle East will likely result in a lower growth rate than originally expected, however we expect that the second half of 2011 into the first half of 2012 will be strong."
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