Jefferies on Aerospace & Defense Electronics: US Business Jet Fleet Continues to Grow
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Rating Summary:
1 Buy, 10 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 8 | New: 13
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Jefferies on Aerospace & Defense Electronics
Jefferies analyst said, "Over the past three trading days, shares of Aerospace & Defense suppliers slightly underperformed the broader market with a decline of 2.4% vs. a decrease of 2.3% for the S&P 500. The most significant underperformers for the period included: Esterline Technologies (NYSE: ESL) (-6.1%), Orbital Sciences (NYSE: ORB) (-5.4%), L-3 Communications (NYSE: LLL) (-4.6%), and Mercury Computer (Nasdaq: MRCY) (-4.6%). Only General Dynamics (NYSE: GD) (+0.3%) was positive over the time frame."
"While the US business jet fleet continues to grow, utilization per plane is down.We used FAA data for domestic operations and fleet data to construct our index. While the market might be a bit better than it was in the fall of 2009, the recovery in business jet utilization is marginal. The data show we are clearly not back to 2006 levels of utilization, the last time the market was booming. Demand is on the order of 25-35% below peak levels. It is not as if airplanes have sharply less utility because of age, so it seems to us that any meaningful need for new aircraft requires a pick-up in the U.S, which still accounts for more than half of the world's fleet. We believe pricing for charters, retrofit demand and utilization rates will be indications for firming in the OE market. At 4-5% traffic growth per year, there could still be half a decade of challenge, barring an even greater boom in Asia."
"For the 12 months through late November, we figure Boeing (NYSE: BA) and Airbus have landed nearly 2,500 gross orders valued at $140 billion. Net orders are in the range of 2,250 units worth around $125 billion. Airbus has about 70% of the unit orders, but only 58% of the dollar orders due to the substantial demand for the 777 widebody. Firming of the 737 MAX commitments will narrow, but not reverse the Airbus lead. Typically, share prices respond to the improvement in orders. The shares of both EADS and BA would seem to not fully reflect the value of recent bookings."
Other Stocks of Note: United Tech (NYSE: UTX), BE Aerospace (Nasdaq: BEAV), Hexcel Corp (NYSE: HXL) and Rockwell Collins (NYSE: COL), Lockheed Martin (NYSE: LMT), Raytheon (NYSE: RTN) & Northrop Grumman (NYSE: NOC).
Jefferies analyst said, "Over the past three trading days, shares of Aerospace & Defense suppliers slightly underperformed the broader market with a decline of 2.4% vs. a decrease of 2.3% for the S&P 500. The most significant underperformers for the period included: Esterline Technologies (NYSE: ESL) (-6.1%), Orbital Sciences (NYSE: ORB) (-5.4%), L-3 Communications (NYSE: LLL) (-4.6%), and Mercury Computer (Nasdaq: MRCY) (-4.6%). Only General Dynamics (NYSE: GD) (+0.3%) was positive over the time frame."
"While the US business jet fleet continues to grow, utilization per plane is down.We used FAA data for domestic operations and fleet data to construct our index. While the market might be a bit better than it was in the fall of 2009, the recovery in business jet utilization is marginal. The data show we are clearly not back to 2006 levels of utilization, the last time the market was booming. Demand is on the order of 25-35% below peak levels. It is not as if airplanes have sharply less utility because of age, so it seems to us that any meaningful need for new aircraft requires a pick-up in the U.S, which still accounts for more than half of the world's fleet. We believe pricing for charters, retrofit demand and utilization rates will be indications for firming in the OE market. At 4-5% traffic growth per year, there could still be half a decade of challenge, barring an even greater boom in Asia."
"For the 12 months through late November, we figure Boeing (NYSE: BA) and Airbus have landed nearly 2,500 gross orders valued at $140 billion. Net orders are in the range of 2,250 units worth around $125 billion. Airbus has about 70% of the unit orders, but only 58% of the dollar orders due to the substantial demand for the 777 widebody. Firming of the 737 MAX commitments will narrow, but not reverse the Airbus lead. Typically, share prices respond to the improvement in orders. The shares of both EADS and BA would seem to not fully reflect the value of recent bookings."
Other Stocks of Note: United Tech (NYSE: UTX), BE Aerospace (Nasdaq: BEAV), Hexcel Corp (NYSE: HXL) and Rockwell Collins (NYSE: COL), Lockheed Martin (NYSE: LMT), Raytheon (NYSE: RTN) & Northrop Grumman (NYSE: NOC).
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