Sector Snap: Aerospace stocks end mixed

November 14, 2011

LOS ANGELES (AP) -- Shares of several major aerospace companies finished mixed on Monday, after Wedbush analysts predicted that growth in China and Asia will help prop up commercial aerospace demand despite slower growth in North America and Europe.

The aerospace industry also got a lift from news that Oman Air ordered six Boeing 787-8 aircraft from the Chicago-based aircraft manufacturer.

In a client note, Wedbush analysts Kenneth Herbert and Andrew Doupe said that, after meetings with aerospace companies in China, they came away with a bullish outlook for the nation and a commercial aerospace recovery.

They anticipate that China will escape any significant fallout from the debt crisis in Europe or the threat of an economic slowdown there or in North America.

That should translate in steady growth for China, the most important commercial aerospace market in the Asia-Pacific region. It also means that production volume increases announced by Boeing Co. and Airbus through 2013 will flow through, the analysts said.

"While demand in China and other emerging economies alone won't offset any significant slowdown in more mature economies, we believe that steady growth in China and across Asia, coupled with slower growth in North America and Europe, will provide support for the cycle and the announced production increases to continue into 2013-2014," the analysts concluded.

The analysts do expect that there will be slower growth for Chinese aftermarket parts demand than this year, amid an overall global decline in the growth of parts sales.

They also said growth of China's business jet market could be slower than anticipated. The analysts say China will be the fastest growing market for business jets, and likely rank third behind North America and Europe over the next 10 years.

Herbert and Doupe highlighted a few aerospace stocks they see as having a better risk-reward profile: Boeing, Triumph Group Inc., Precision Castparts Corp. and Spirit Aerosystems Holdings.

The analysts also like Heico Corp., TransDigm Group Inc. and AMR Corp.

Among the aerospace stocks that closed higher on Monday: Boeing rose $1.02 to $67.94; Triumph rose $1.75, or 3.2 percent, to $56.72; Spirit Aerosystems rose 47 cents, or 2.4 percent, to $19.72; BE Aerospace Inc. rose 37 cents to $38.77; and, Hexcel Corp. rose 38 cents to $24.63.

Sector stocks that finished down included Precision Castparts, which fell $3.16, or 2 percent, to $164.18; Heico lost 76 cents at $59.43; TransDigm fell 51 cents to $97.42; and, AMR Corp. fell 11 cents, or 5 percent, to $2.14.