Baird analyst Peter Arment reflects on the firm’s Aerospace & Defense research coverage as traders prepare for another volatile year.

Arment remains bullish on aerospace stocks for 2023 due to the “ongoing reopening of the economy globally and continued recovery in air travel with the biggest unknowns of international and corporate travel remaining as watch items.”

The analyst highlighted Boeing (NYSE: BA), Heico (NYSE: HEI), and TransDigm (NYSE: TDG) as his Top Picks for 2023.

Boeing, in particular, is described as “top cyclical play with several regulatory headwinds in the rearview mirror.”

“Most investors don’t factor BA’s Defense portfolio as part of the investment thesis, but we expect a gradual improvement in operating cash flow in the BSD segment as large fixed-price charges associated with a handful of programs have caused multi-billion-dollar charges to be incurred due to cost overruns and inefficient project management,” the analyst wrote in a client note.

On the other hand, Arment downgraded Triumph Group (NYSE: TGI) to Neutral reflecting “leverage concerns as its maturity wall comes current in June 2023.”

By Senad Karaahmetovic