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The ZacksAerospace-Defense Equipment industry remains supported by strategic M&A activity and resilient air-travel demand, although persistent supply-chain constraints pose risks. Recent acquisitions are expanding product offerings, capabilities and exposure to defense and aerospace markets, while rising passenger traffic is increasing aircraft utilization and supporting demand for replacement parts, avionics, engines and other components.
However, higher operating costs, limited aircraft availability, labor shortages and supply-chain disruptions continue to pressure airlines and aerospace manufacturers. Some key players from this industry that investors may add to their portfolio are HEICO Corp., ATI INC and AAR Corp.
About the Industry
The Zacks Aerospace-Defense Equipment industry comprises firms that manufacture various vital components for the aerospace-defense space, ranging from aerostructures, space shuttles, propulsion systems, aircraft engines, defense electronics, missile and radar systems to flight test equipment, structural adhesives, instrumentation and control systems, communication products and many more.
Some of these companies also offer integrated simulation and training services to the U.S. defense force. While most revenues are generated from the production of the aforementioned components, industry players also generate revenue by providing aftermarket support and services, such as maintenance, repair and overhaul (MRO), to aerospace and defense companies.
3 Trends Shaping the Future of the Aerospace-Defense Equipment Industry
Strategic M&A Activity Strengthens Industry Growth Prospects: Large companies have increasingly turned to mergers and acquisitions (M&As) to expand their product portfolios, enhance capabilities, and strengthen their competitive positions. In June 2026, HEICO acquired 80% of Cook Defence Systems, a key supplier of track systems for armored military vehicles, forming HEICO-Cook Defence.
The deal expands HEICO’s defense portfolio and gives it exposure to armored-vehicle modernization and defense spending, adding another source of long-term growth. In April 2026, AAR completed the acquisition of Aircraft Reconfig Technologies from ZIM Aircraft Cabin Solutions. This adds FAA Organization Designation Authorization to AAR’s Engineering Services capabilities, which will enable AAR to issue supplemental type certificates and Parts Manufacturer Approval without depending on third parties.
Such strategic consolidation can help companies expand their capabilities, diversify their business models and improve operational efficiencies. Over time, broader offerings and economies of scale could support industry expansion and contribute to sustained revenue growth.
Air Traffic View Boosts Opportunities: According to a report by the International Air Transport Association (“IATA”), global air passenger demand is expected to grow 2.1% year over year in 2026. IATA reported that global passenger demand returned to growth in July 2026, with Revenue Passenger Kilometers (RPK) increasing 0.2% year over year, following contractions in May and June.
Capacity rose 0.3%, while the global passenger load factor remained high at 85.2%, indicating resilient underlying air-travel demand despite elevated fuel costs, economic uncertainty and geopolitical tensions. As passenger traffic increases, airlines fly their existing fleets more frequently. This higher utilization accelerates wear and tear on aircraft, engines and components, boosting demand for replacement parts, avionics, landing systems and other equipment.
Supply-Chain Disruption Poses Risks: According to IATA, airlines are facing higher operating costs because supply-chain problems have made spare parts more expensive and harder to obtain. Airport fees, air traffic charges and aircraft ownership costs have also increased. With new aircraft in short supply, airlines are leasing older, mid-life planes at higher rates.
These older aircraft also consume more fuel, further increasing overall expenses. IATA has highlighted that limited aircraft availability and labor shortages remain key supply-side challenges, while broader disruptions continue to delay the timely production and delivery of essential systems. Per IATA, ongoing disruptions to global supply chains and operational constraints linked to the Middle East conflict are adding pressure to an already tight market, reinforcing the existing aircraft shortage.
Aircraft deliveries have fallen well below the level expected if the industry had continued growing at its pre-pandemic pace, creating an estimated shortage of about 5,600 aircraft. The total order backlog reached 18,100 aircraft in May 2026, equal to almost 60% of the active fleet. The reduced pace of jet deliveries and limited availability of materials for aircraft manufacturing may compel OEMs to cut production, potentially weighing on near-term earnings and cash flow across the aerospace and defense equipment industry.
Zacks Industry Rank Reflects Bright Outlook
The Zacks Aerospace-Defense Equipment industry is housed within the broader Zacks Aerospace sector. It currently carries a Zacks Industry Rank #50, which places it in the top 20% of more than 247 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates robust near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few aerospace-defense equipment stocks that you may want to add to your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Beats Sector, Lags S&P 500
The Aerospace-Defense Equipment industry has underperformed the Zacks S&P 500 composite but outperformed the sector over the past year. The stocks in this industry have collectively lost 4.9% over the past year, while the Aerospace sector has declined 9.5%. The Zacks S&P 500 composite has gained 16.5% over the same time frame.
Industry's Current Valuation
On the basis of trailing 12-month EV/Sales, which is used for valuing capital-intensive stocks like aerospace-defense equipment, the industry is currently trading at 11.45X compared with the S&P 500’s 5.6X and the sector’s 2.9X.
Over the past five years, the industry has traded as high as 15.7X, as low as 6.09X and at the median of 8.62X.
3 Aerospace-Defense Equipment Stocks to Buy
ATI:Dallas, TX-based ATI is a diversified global specialty materials producer. ATI delivered a strong second quarter in 2026, with sales rising 11% year over year to $1.26 billion, driven by a 13% increase in aerospace & defense sales. Aerospace & defense remained central to ATI’s performance, particularly within its High Performance Materials & Components (“HPMC”) segment, where the end markets represented 93% of sales and commercial jet-engine sales grew 10% year over year, supported by strong demand and pricing. The Advanced Alloys & Solutions (“AA&S”) segment also saw significant momentum, with aerospace & defense sales increasing 34% year over year, including a 90% increase in defense sales, reflecting higher demand and pricing.
The Zacks Consensus Estimate for ATI’s 2026 sales indicates a 12.9% improvement year over year. The estimate for 2026 earnings implies 54% growth year over year. ATI currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
HEICO:Florida-based HEICO is one of the world’s leading manufacturers of FAA-approved jet engine and aircraft component replacement parts. It also manufactures various types of electronic equipment for the aviation, defense, space, medical, telecommunications and electronics industries. HEICO reported a strong third quarter of fiscal 2026, with net sales increasing 23% year over year to a record $1.41 billion, while net income rose 33% to a record $235.4 million and operating income climbed 34% to $355.2 million. The company’s aerospace and defense businesses were key contributors, with Flight Support Group (“FSG”) posting 18% sales growth, supported by 12% organic growth and contributions from recent acquisitions, while operating income increased 24%.
The Zacks Consensus Estimate for HEI’s fiscal 2026 sales indicates a 19.9% improvement year over year. The estimate for fiscal 2026 earnings implies 27.1% year-over-year growth. HEI currently has a Zacks Rank #2 (Buy).
AAR:Based in Wood Dale, IL, the company provides various products and services to the aviation and defense industries worldwide. During the fourth quarter of fiscal 2026, it reorganized its reporting structure into four operating segments: Parts Supply; Repair, Engineering, and Software; Government Solutions; and Legacy Commercial Programs. The Parts Supply segment primarily consists of aftermarket distribution of new, OEM-supplied replacement parts and sales and leasing of used serviceable engine and airframe material. The segment also distributes electronic components and assemblies to OEMs through ADI. Parts Supply accounted for nearly 45% of total sales in fiscal 2026.
The Zacks Consensus Estimate for AIR’s fiscal 2027 sales indicates an 11.6% improvement year over year. The estimate for 2026 earnings implies 17.2% growth year over year. AIR currently carries a Zacks Rank #2.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
View the Zacks #1 Rank List
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Zacks Industry Outlook HEICO, ATI and AAR
For Immediate Release
Chicago, IL – September 17, 2026 – Today, Zacks Equity as HEICO Corp. (HEI - Free Report) , ATI INC (ATI - Free Report) and AAR Corp. (AIR - Free Report) .
Industry: Aerospace - Defense
Link: https://www.zacks.com/commentary/2990338/3-aerospace-defense-equipment-stocks-riding-on-strong-demand
The ZacksAerospace-Defense Equipment industry remains supported by strategic M&A activity and resilient air-travel demand, although persistent supply-chain constraints pose risks. Recent acquisitions are expanding product offerings, capabilities and exposure to defense and aerospace markets, while rising passenger traffic is increasing aircraft utilization and supporting demand for replacement parts, avionics, engines and other components.
However, higher operating costs, limited aircraft availability, labor shortages and supply-chain disruptions continue to pressure airlines and aerospace manufacturers. Some key players from this industry that investors may add to their portfolio are HEICO Corp., ATI INC and AAR Corp.
About the Industry
The Zacks Aerospace-Defense Equipment industry comprises firms that manufacture various vital components for the aerospace-defense space, ranging from aerostructures, space shuttles, propulsion systems, aircraft engines, defense electronics, missile and radar systems to flight test equipment, structural adhesives, instrumentation and control systems, communication products and many more.
Some of these companies also offer integrated simulation and training services to the U.S. defense force. While most revenues are generated from the production of the aforementioned components, industry players also generate revenue by providing aftermarket support and services, such as maintenance, repair and overhaul (MRO), to aerospace and defense companies.
3 Trends Shaping the Future of the Aerospace-Defense Equipment Industry
Strategic M&A Activity Strengthens Industry Growth Prospects: Large companies have increasingly turned to mergers and acquisitions (M&As) to expand their product portfolios, enhance capabilities, and strengthen their competitive positions. In June 2026, HEICO acquired 80% of Cook Defence Systems, a key supplier of track systems for armored military vehicles, forming HEICO-Cook Defence.
The deal expands HEICO’s defense portfolio and gives it exposure to armored-vehicle modernization and defense spending, adding another source of long-term growth. In April 2026, AAR completed the acquisition of Aircraft Reconfig Technologies from ZIM Aircraft Cabin Solutions. This adds FAA Organization Designation Authorization to AAR’s Engineering Services capabilities, which will enable AAR to issue supplemental type certificates and Parts Manufacturer Approval without depending on third parties.
Such strategic consolidation can help companies expand their capabilities, diversify their business models and improve operational efficiencies. Over time, broader offerings and economies of scale could support industry expansion and contribute to sustained revenue growth.
Air Traffic View Boosts Opportunities: According to a report by the International Air Transport Association (“IATA”), global air passenger demand is expected to grow 2.1% year over year in 2026. IATA reported that global passenger demand returned to growth in July 2026, with Revenue Passenger Kilometers (RPK) increasing 0.2% year over year, following contractions in May and June.
Capacity rose 0.3%, while the global passenger load factor remained high at 85.2%, indicating resilient underlying air-travel demand despite elevated fuel costs, economic uncertainty and geopolitical tensions. As passenger traffic increases, airlines fly their existing fleets more frequently. This higher utilization accelerates wear and tear on aircraft, engines and components, boosting demand for replacement parts, avionics, landing systems and other equipment.
Supply-Chain Disruption Poses Risks: According to IATA, airlines are facing higher operating costs because supply-chain problems have made spare parts more expensive and harder to obtain. Airport fees, air traffic charges and aircraft ownership costs have also increased. With new aircraft in short supply, airlines are leasing older, mid-life planes at higher rates.
These older aircraft also consume more fuel, further increasing overall expenses. IATA has highlighted that limited aircraft availability and labor shortages remain key supply-side challenges, while broader disruptions continue to delay the timely production and delivery of essential systems. Per IATA, ongoing disruptions to global supply chains and operational constraints linked to the Middle East conflict are adding pressure to an already tight market, reinforcing the existing aircraft shortage.
Aircraft deliveries have fallen well below the level expected if the industry had continued growing at its pre-pandemic pace, creating an estimated shortage of about 5,600 aircraft. The total order backlog reached 18,100 aircraft in May 2026, equal to almost 60% of the active fleet. The reduced pace of jet deliveries and limited availability of materials for aircraft manufacturing may compel OEMs to cut production, potentially weighing on near-term earnings and cash flow across the aerospace and defense equipment industry.
Zacks Industry Rank Reflects Bright Outlook
The Zacks Aerospace-Defense Equipment industry is housed within the broader Zacks Aerospace sector. It currently carries a Zacks Industry Rank #50, which places it in the top 20% of more than 247 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates robust near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few aerospace-defense equipment stocks that you may want to add to your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Beats Sector, Lags S&P 500
The Aerospace-Defense Equipment industry has underperformed the Zacks S&P 500 composite but outperformed the sector over the past year. The stocks in this industry have collectively lost 4.9% over the past year, while the Aerospace sector has declined 9.5%. The Zacks S&P 500 composite has gained 16.5% over the same time frame.
Industry's Current Valuation
On the basis of trailing 12-month EV/Sales, which is used for valuing capital-intensive stocks like aerospace-defense equipment, the industry is currently trading at 11.45X compared with the S&P 500’s 5.6X and the sector’s 2.9X.
Over the past five years, the industry has traded as high as 15.7X, as low as 6.09X and at the median of 8.62X.
3 Aerospace-Defense Equipment Stocks to Buy
ATI:Dallas, TX-based ATI is a diversified global specialty materials producer. ATI delivered a strong second quarter in 2026, with sales rising 11% year over year to $1.26 billion, driven by a 13% increase in aerospace & defense sales. Aerospace & defense remained central to ATI’s performance, particularly within its High Performance Materials & Components (“HPMC”) segment, where the end markets represented 93% of sales and commercial jet-engine sales grew 10% year over year, supported by strong demand and pricing. The Advanced Alloys & Solutions (“AA&S”) segment also saw significant momentum, with aerospace & defense sales increasing 34% year over year, including a 90% increase in defense sales, reflecting higher demand and pricing.
The Zacks Consensus Estimate for ATI’s 2026 sales indicates a 12.9% improvement year over year. The estimate for 2026 earnings implies 54% growth year over year. ATI currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
HEICO:Florida-based HEICO is one of the world’s leading manufacturers of FAA-approved jet engine and aircraft component replacement parts. It also manufactures various types of electronic equipment for the aviation, defense, space, medical, telecommunications and electronics industries. HEICO reported a strong third quarter of fiscal 2026, with net sales increasing 23% year over year to a record $1.41 billion, while net income rose 33% to a record $235.4 million and operating income climbed 34% to $355.2 million. The company’s aerospace and defense businesses were key contributors, with Flight Support Group (“FSG”) posting 18% sales growth, supported by 12% organic growth and contributions from recent acquisitions, while operating income increased 24%.
The Zacks Consensus Estimate for HEI’s fiscal 2026 sales indicates a 19.9% improvement year over year. The estimate for fiscal 2026 earnings implies 27.1% year-over-year growth. HEI currently has a Zacks Rank #2 (Buy).
AAR:Based in Wood Dale, IL, the company provides various products and services to the aviation and defense industries worldwide. During the fourth quarter of fiscal 2026, it reorganized its reporting structure into four operating segments: Parts Supply; Repair, Engineering, and Software; Government Solutions; and Legacy Commercial Programs. The Parts Supply segment primarily consists of aftermarket distribution of new, OEM-supplied replacement parts and sales and leasing of used serviceable engine and airframe material. The segment also distributes electronic components and assemblies to OEMs through ADI. Parts Supply accounted for nearly 45% of total sales in fiscal 2026.
The Zacks Consensus Estimate for AIR’s fiscal 2027 sales indicates an 11.6% improvement year over year. The estimate for 2026 earnings implies 17.2% growth year over year. AIR currently carries a Zacks Rank #2.
Free: Instant Access to Zacks' Market-Crushing Strategies
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can tap into those powerful strategies – and the high-potential stocks they uncover – free. No strings attached.
Get all the details here >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.