Back to top

Factory Orders Jump Highest in 11 Months: 5 Aircraft Picks

Read MoreHide Full Article

In August, U.S. factory orders increased by the widest margin in nearly a year. The primary catalyst for the month’s gains was a jump in orders for aircraft. The report was in keeping with data on August’s durable orders released last week, which also reflected an increase in orders for aircraft. Gains were felt across both the civilian and defense domains.

Further, though the ISM manufacturing index declined marginally, the sector continues to expand at a rapid pace. Trump’s approval of a substantial military budget for 2019 is also providing a boost to the aerospace and defense sectors. Investing in stocks of aircraft and parts companies looks like a smart option at this time.

Increase Highest in 11 Months

According to a report from the U.S. Census Bureau, factory orders increased by 2.3%, or $11.5 billion, to $510.5 billion in August. This is the largest monthly increase experienced since September 2017 and exceeded expectations of a 1.8% increase. Further, it comes after a drop in July, which was revised to reflect a decline of 0.5%, lower than the 0.8% decrease.

August’s reading was also up 8.6% year over year. Orders for transportation equipment surged 13.1%, marking the biggest increase since June 2017. This metric in turn was fueled by a 69.1% jump in orders for non-defense aircraft and parts. Orders for defense aircraft and parts increased by 17% over the month.

Manufacturing in Robust Health, Defense Bill to Boost Spending

Meanwhile, the ISM manufacturing index declined from the 14-year high of 61.3% in August to 59.8% in September. Of the 18 manufacturing industries that were surveyed, 15 reported growth. While any figure above 50% indicates expansion, a reading above 55% is outstanding. The index has now expanded for the 113th month on the trot.

Additionally, on Aug 13, President Trump gave the final nod to the colossal fiscal 2019 National Defense Authorization Act (NDAA), thus sanctioning a spending allowance of $717 billion for United States’ national security.

Notably, since Trump’s ascension to presidency, companies in the Aerospace and Defense space have gained the maximum in comparison to other sectors. The recent signing of the fiscal 2019 defense policy bill has perked up prospects of these stocks. (Read: Trump Sanctions $717B Defense Policy Bill: 4 Stocks to Buy)

Our Choices

The jump in factory orders indicates that the manufacturing sector is in fine fettle. Orders for aircraft and related parts, in particular, are responsible for August’s gains. Trump’s massive defense budget for 2019 has also delivered a major boost to aerospace stocks.

Investing in companies producing aircraft and related parts looks prudent at this point. We have narrowed our search to the following stocks based on a good Zacks Rank and other relevant metrics.

AeroVironment, Inc. (AVAV - Free Report) designs, develops, produces and operates a portfolio of products and services for government agencies, businesses and consumers. It is primarily a provider of unmanned aircraft systems and related services.

AeroVironment’s expected earnings growth for the current year is 25.5%. The Zacks Consensus Estimate for the current year has improved by 12.9% over the last 30 days. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

HEICO Corporation (HEI - Free Report) is one of the world’s leading manufacturers of Federal Aviation Administration approved jet engine and aircraft component replacement parts.

HEICO has a Zacks Rank #2 (Buy). The company’s expected earnings growth for the current year is 39.1%.  The Zacks Consensus Estimate for the current year has improved by 0.5% over the last 30 days.

Moog Inc. (MOG.A - Free Report) is a designer, manufacturer and integrator of precision motion control products and solutions for the aerospace, defense and industrial markets.

Moog has a Zacks Rank #2. The company’s expected earnings growth for the current year is 17.5%. The Zacks Consensus Estimate for the current year has improved by 0.5% over the last 30 days.

Wesco Aircraft Holdings, Inc. (WAIR - Free Report) distributes and provides supply chain management services to the global aerospace industry.

Wesco Aircraft Holdings has a Zacks Rank #2. The company’s expected earnings growth for the current year is 19%. The Zacks Consensus Estimate for the current year has improved by 3.9% over the last 60 days.

Astronics Corporation (ATRO - Free Report) is a manufacturer of specialized lighting and electronics for the cockpit, cabin and exteriors of military, commercial transport and private business jet aircraft.

Astronics has a Zacks Rank #2. The company has expected earnings growth of 27.6% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.2% over the last 60 days.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>



More from Zacks Analyst Blog

You May Like

Published in