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3 Aerospace & Defense Stocks to Invest in Amid Rising Yields
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Key Takeaways
BDRBF benefits from defense programs and 31.5% expected current-year earnings growth.
EADSY offers military aerospace exposure, with 10.7% expected earnings growth.
EMBJ's defense presence and 121.7% expected earnings growth add to its profile.
Rising bond yields are creating headwinds for several rate-sensitive areas of Wall Street, but aerospace and defense stocks could remain relatively resilient. The benchmark 10-year Treasury yield recently touched 5.23%, its highest level since June 2007, while the 30-year yield reached 5.55%, as inflation concerns, elevated oil prices and expectations for additional Federal Reserve tightening pressured the bond market.
Against this backdrop, Bombardier Inc. (BDRBF - Free Report) , Airbus SE (EADSY - Free Report) and Embraer S.A. (EMBJ - Free Report) stand out as aerospace and defense stocks that could benefit from this environment.
Defense Spending Provides a Cushion
Aerospace and defense companies can have characteristics that help cushion the impact of higher borrowing costs. Defense contractors often benefit from multi-year government contracts, relatively predictable procurement programs and sustained federal spending. Consequently, their revenue visibility can be less dependent on interest-rate-sensitive consumer or commercial demand.
Global Conflicts Support Defense Demand
The geopolitical backdrop is providing another important catalyst. Conflicts involving the United States and Iran remain unresolved, while tensions across the Middle East continue to influence energy markets and government security priorities. At the same time, governments in the United States, Europe and the Asia-Pacific are increasing defense investments and modernizing capabilities across air, land, sea, cyber and space. Global military spending has climbed to record levels, creating opportunities for defense equipment manufacturers and specialized aerospace suppliers.
Higher yields can therefore create a mixed market environment, but defense spending is driven by strategic and national-security requirements rather than simply by economic growth. BDRBF's business across business aircraft, specialized aircraft and defense-related programs, EADSY's broad commercial and military aerospace portfolio and EMBJ's growing presence in defense aircraft provide exposure to long-term aerospace and defense spending trends.
Our Choices
The stocks below carry a Zacks Rank #2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here, V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Bombardier designs, manufactures and services business aircraft, offering a portfolio of private jets alongside specialized aircraft, defense solutions, aircraft maintenance, engineering and aftermarket services for customers worldwide. BDRBF’s expected earnings growth rate for the current year is 31.5%. The Zacks Consensus Estimate for its current-year earnings has increased 23% over the past 60 days. This company has a VGM Score of A. Over the past month, BDRBF’s stock has risen 4.4%, outperforming the Zacks Aerospace - Defense Equipment industry, which has declined 5.8%.
Airbus designs and manufactures commercial aircraft, military aircraft, helicopters and defense systems, while providing space solutions, maintenance, training and support services to customers worldwide. EADSY’s expected earnings growth rate for the current year is 10.7%. The Zacks Consensus Estimate for its current-year earnings has improved 1% over the past 60 days. This company has a VGM Score of B. Over the past month, EADSY’s stock has lost 5.2%, still outperforming the defense equipment industry.
Embraer designs and manufactures commercial, executive and military aircraft, while providing defense and security solutions, aviation services, maintenance and support to customers worldwide. EMBJ’s expected earnings growth rate for the current year is 121.7%. The Zacks Consensus Estimate for its current-year earnings has increased 8.1% over the past 60 days. This company has a VGM Score of A. Over the past month, EMBJ’s stock has risen 7.4%, outperforming the Zacks Aerospace - Defense industry’s 7.7% decline.
Bottom Line
With inflation keeping yields elevated and geopolitical risks supporting defense budgets, aerospace and defense stocks could remain an important area of investor attention despite broader interest rate pressures.
View the Zacks #1 Rank List
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3 Aerospace & Defense Stocks to Invest in Amid Rising Yields
Key Takeaways
Rising bond yields are creating headwinds for several rate-sensitive areas of Wall Street, but aerospace and defense stocks could remain relatively resilient. The benchmark 10-year Treasury yield recently touched 5.23%, its highest level since June 2007, while the 30-year yield reached 5.55%, as inflation concerns, elevated oil prices and expectations for additional Federal Reserve tightening pressured the bond market.
Against this backdrop, Bombardier Inc. (BDRBF - Free Report) , Airbus SE (EADSY - Free Report) and Embraer S.A. (EMBJ - Free Report) stand out as aerospace and defense stocks that could benefit from this environment.
Defense Spending Provides a Cushion
Aerospace and defense companies can have characteristics that help cushion the impact of higher borrowing costs. Defense contractors often benefit from multi-year government contracts, relatively predictable procurement programs and sustained federal spending. Consequently, their revenue visibility can be less dependent on interest-rate-sensitive consumer or commercial demand.
Global Conflicts Support Defense Demand
The geopolitical backdrop is providing another important catalyst. Conflicts involving the United States and Iran remain unresolved, while tensions across the Middle East continue to influence energy markets and government security priorities. At the same time, governments in the United States, Europe and the Asia-Pacific are increasing defense investments and modernizing capabilities across air, land, sea, cyber and space. Global military spending has climbed to record levels, creating opportunities for defense equipment manufacturers and specialized aerospace suppliers.
Higher yields can therefore create a mixed market environment, but defense spending is driven by strategic and national-security requirements rather than simply by economic growth. BDRBF's business across business aircraft, specialized aircraft and defense-related programs, EADSY's broad commercial and military aerospace portfolio and EMBJ's growing presence in defense aircraft provide exposure to long-term aerospace and defense spending trends.
Our Choices
The stocks below carry a Zacks Rank #2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here, V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
Bombardier designs, manufactures and services business aircraft, offering a portfolio of private jets alongside specialized aircraft, defense solutions, aircraft maintenance, engineering and aftermarket services for customers worldwide. BDRBF’s expected earnings growth rate for the current year is 31.5%. The Zacks Consensus Estimate for its current-year earnings has increased 23% over the past 60 days. This company has a VGM Score of A. Over the past month, BDRBF’s stock has risen 4.4%, outperforming the Zacks Aerospace - Defense Equipment industry, which has declined 5.8%.
Airbus designs and manufactures commercial aircraft, military aircraft, helicopters and defense systems, while providing space solutions, maintenance, training and support services to customers worldwide. EADSY’s expected earnings growth rate for the current year is 10.7%. The Zacks Consensus Estimate for its current-year earnings has improved 1% over the past 60 days. This company has a VGM Score of B. Over the past month, EADSY’s stock has lost 5.2%, still outperforming the defense equipment industry.
Embraer designs and manufactures commercial, executive and military aircraft, while providing defense and security solutions, aviation services, maintenance and support to customers worldwide. EMBJ’s expected earnings growth rate for the current year is 121.7%. The Zacks Consensus Estimate for its current-year earnings has increased 8.1% over the past 60 days. This company has a VGM Score of A. Over the past month, EMBJ’s stock has risen 7.4%, outperforming the Zacks Aerospace - Defense industry’s 7.7% decline.
Bottom Line
With inflation keeping yields elevated and geopolitical risks supporting defense budgets, aerospace and defense stocks could remain an important area of investor attention despite broader interest rate pressures.