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Summary of Industrials: Aerospace & Defense and Airline Sectors

Core Content Overview

This document provides an analysis of the Aerospace & Defense and Airline Sectors, focusing on commercial aerospace, defense, IT services, and airplanes. It includes insights into production trends, financial performance, ratings, and valuation metrics for various companies in these sectors as of June 5, 2025.

Main Points and Key Insights

Commercial Aerospace

• Boeing (BA):

  • MAX production and deliveries are a key growth catalyst for investors.
  • Estimated build and delivery rates increase to 27/mo and 30/mo in Q2:25, respectively, and are expected to reach 38/mo by the end of the year.
  • The company is projected to achieve $114,596 million in revenue by 2025, with $7.50 in EPS and $8,947 million in FCF.
  • JEF estimates a Price Target of $250, with a 18% upside from current price of $211.98.

• GE (General Electric):

  • Holds a premium aerospace franchise with a 70% aftermarket mix.
  • Expected to deliver $1BB+ EBIT in 2028 due to increasing LEAP AM volumes and profits.
  • JEF estimates a Price Target of $260, with a 4% upside from current price of $250.88.

• FTAI (Farnell Technologies):

  • A leading AM power provider, offering significant cost and time savings through green-time optimization.
  • EBITDA is on track for $1.4BB by 2026, up 40% since mid-2024.
  • JEF estimates a Price Target of $175, with a 42% upside from current price of $122.82.

• HWM (Honeywell International):

  • Expected to gain 30%+ incrementalals through recovery, share gains, and net pricing, supporting margin expansion to 30%.
  • JEF estimates a Price Target of $195, with a 12% upside from current price of $173.94.

• WWD (Worthington Worldwide):

  • Unlocking volumes across Aerospace and Industrial sectors.
  • Holds 5X services content compared to previous generation engines.
  • JEF estimates a Price Target of $245, with a 72.3% upside from current price of $234.51.

Defense Sector

• LHX (Lockheed Martin):

  • Driven by DoD radio modernization, airborne ISR demand, higher budgets, and electronic warfare orders.
  • Expected to see organic growth and op leverage from incremental volumes and synergy capture.
  • JEF estimates a Price Target of $260, with a 7% upside from current price of $242.31.

• LMT (Lockheed Martin):

  • A top-ranked defense contractor with $80,428 million in revenue for FY2025.
  • JEF estimates a Price Target of $500, with a 4% upside from current price of $482.21.

• NOC (Northrop Grumman):

  • Expected to deliver $45,707 million in revenue for FY2025.
  • JEF estimates a Price Target of $510, with a 4% upside from current price of $491.29.

• RTX (Raytheon Technologies):

  • Holds a $92,379 million revenue target for FY2025.
  • JEF estimates a Price Target of $130, with a -6% downside from current price of $138.55.

• TDY (Textron):

  • Expected to see organic growth and margin expansion.
  • JEF estimates a Price Target of $555, with an 11% upside from current price of $498.11.

IT Services Sector

• CACI:

  • Peer-leading organic growth with potential for margin expansion due to favorable exposure to new admin priorities.
  • JEF estimates a Price Target of $535, with a 26% upside from current price of $425.21.

• BAH (Booz Allen Hamilton):

  • Expected to deliver $13,979 million in revenue for FY2025.
  • JEF estimates a Price Target of $120, with a 17% upside from current price of $102.51.

• LDOS (Leidos):

  • Expected to deliver $18,402 million in revenue for FY2025.
  • JEF estimates a Price Target of $175, with a 21% upside from current price of $144.42.

• PSN (Parsons):

  • Expected to deliver $7,086 million in revenue for FY2025.
  • JEF estimates a Price Target of $70, with a 2% upside from current price of $68.77.

• SAIC:

  • Expected to deliver $7,838 million in revenue for FY2025.
  • JEF estimates a Price Target of $115, with a 12% upside from current price of $102.27.

Airplanes Sector

• AAL (American Airlines):

  • Expected to deliver $61,514 million in revenue for FY2025.
  • JEF estimates a Price Target of $11.0, with a -4% downside from current price of $11.42.

• DAL (Delta Air Lines):

  • Expected to deliver $63,351 million in revenue for FY2025.
  • JEF estimates a Price Target of $46, with a -6% downside from current price of $48.98.

• LUV (Southwest Airlines):

  • Expected to deliver $31,199 million in revenue for FY2025.
  • JEF estimates a Price Target of $33, with a 2% upside from current price of $32.27.

• UAL (United Airlines):

  • Expected to deliver $67,224 million in revenue for FY2025.
  • JEF estimates a Price Target of $80, with a -2% downside from current price of $81.62.

Valuation Summary

Key Trends and Outlook

• The Aerospace & Defense sector is expected to benefit from political and economic developments, including DoD modernization, ISR demand, and budget increases.
• Commercial aircraft production is expected to grow, with Boeing's MAX and Airbus' A320neo family being key drivers.
• Aftermarket services are a significant growth area for companies like GE, FTAI, and WWD.
• IT services are projected to benefit from new admin priorities, such as software-enabled network infrastructure and IT system modernization.
• Airlines are showing mixed performance, with UAL and DAL facing downside risks, while LUV and UAL are expected to see modest growth.

Conclusion

The document outlines a positive outlook for the Aerospace & Defense and Airline Sectors, with Boeing, GE, and CACI being highlighted as top performers. The valuation table and ratings provide a comprehensive view of the sector's financial health and investment potential, suggesting that organic growth, synergy capture, and market recovery are the key drivers for value creation.