Aviation Industry Gearing Up For An Aftermarket Supercycle, Says Analyst
Portfolio Pulse from Shivani Kumaresan
William Blair analyst Louie DiPalma initiated coverage on Boeing (BA), Transdigm Group (TDG), and Heico Corporation (HEI), with an Outperform rating, and reiterated the same rating for VSE Corporation (VSEC). DiPalma predicts an aftermarket supercycle in the aviation industry due to increased travel and aging aircraft fleets. Boeing is expected to resume sales of B737 MAX to Chinese airlines. TransDigm is anticipated to return to its historical average premium valuation, and Heico is expected to see at least a 21% upside due to its unique FAA-PMA parts production method.
December 12, 2023 | 6:52 pm
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POSITIVE IMPACT
Boeing is expected to benefit from an aftermarket supercycle, with potential resumption of B737 MAX sales to China and opportunities in the aviation aftermarket business.
The positive outlook on Boeing's aftermarket business and the expected resumption of B737 MAX sales in China are likely to be viewed favorably by investors, potentially leading to a short-term increase in stock price.
CONFIDENCE 80
IMPORTANCE 85
RELEVANCE 90
POSITIVE IMPACT
Heico Corporation is projected to have at least a 21% upside as it returns to its average premium valuation, driven by its proprietary method of reverse engineering aircraft components.
Heico's unique position in the market with FAA-PMA parts and the expected recovery in commercial aerospace post-COVID-19 are likely to contribute to a positive short-term price movement.
CONFIDENCE 75
IMPORTANCE 80
RELEVANCE 85
POSITIVE IMPACT
Transdigm Group is anticipated to exceed a 20% upside as it returns to its historical average premium valuation, leveraging its high-margin product portfolio and M&A activity.
Transdigm's expected return to its historical premium valuation and its consistent performance could lead to positive investor sentiment and a short-term uptick in its stock price.
CONFIDENCE 75
IMPORTANCE 80
RELEVANCE 85
POSITIVE IMPACT
VSE Corporation's Outperform rating is reiterated by the analyst, indicating a positive outlook for the company in the aviation aftermarket supercycle.
The reiteration of the Outperform rating for VSE Corporation suggests that the analyst has a favorable view of the company's future performance, which could lead to a positive short-term reaction in its stock price.
CONFIDENCE 70
IMPORTANCE 70
RELEVANCE 75