Aerospace Coverage Group:

The Boeing Company (BA): Expect A Bumpy Path To Earnings Recovery; Lowering Estimates

We are lowering estimates on The Boeing Company (BA) to account for the approaching commercial aircraft segment shortfall. We expect total deliveries to fall about twenty jets below 2Q21 forecasts as another FAA inquiry has resulted in a 787-customer shipment halt, which translates into roughly $0.50/share of near-term earnings dilution in our model. Presumably, consensus expectations will reset following the company issuance of another disappointing monthly aircraft delivery report in early July. Continue reading

Aerospace: Upgrading Upstream Suppliers On Stronger Aero Sales Outlook And Potential Bottleneck Benefits

We are making a rotational call within the aerospace coverage group, now favoring upstream suppliers that appear to be positioned to benefit from a changing commercial aircraft production environment. The investor narrative may shift to the premium forgers and/or specialty materials providers earlier-than-expected as the supply chain readies for a sharp inflection in demand for 737MAX or A320neo applications, looking beyond negative near-term earnings expectations. As such, we are changing ratings on a few companies that fit into that description. Today, we are formally upgrading Hexcel Corporation (HXL) and Haynes International (HAYN) to Strong Buy investment ratings and moving Allegheny Technologies (ATI) over to Outperform. We had previously rated all three Hold. Continue reading

Aerospace: Suppliers Are Reacting To The New LEAP Production Targets

General Electric (GE) held a conference call with its major suppliers to review all details behind the newly implemented LEAP production schedule and to ensure supply chain alertness. Last week, the company effectively raised the CY22 production outlook to 360-370 engines to account for stronger single-aisle aircraft build rates. This was the third major scheduling adjustment announced by the aircraft OEMs and jet engine suppliers, which suggests an upward bias to CY22-23 expectations for the coverage group. Continue reading

Specialty Materials Coverage Group:

Specialty Materials: Highlights From Quarterly Channel Checks

Despite recent negative headlines regarding a disruption in 787 aircraft production, we are sticking with a bullish thesis on the specialty materials group following a review of better-than-expected quarterly survey results. Communications with industry contacts confirmed much stronger demand/pricing trends in 2Q21, improving channel sentiment and upward forecast revisions, approaching catalysts, and more manageable inventory situations. Key data points collected over the past few months suggest there is an upward bias to consensus forecasts (looking out 3-4 quarters), with emphasis placed on companies levered to jet engine OEM demand and the premium alloy product categories (nickel-based alloys, cobalt-alloys, and specialty stainless steel). Continue reading

Aerospace: Upgrading Upstream Suppliers On Stronger Aero Sales Outlook And Potential Bottleneck Benefits

We are making a rotational call within the aerospace coverage group, now favoring upstream suppliers that appear to be positioned to benefit from a changing commercial aircraft production environment. The investor narrative may shift to the premium forgers and/or specialty materials providers earlier-than-expected as the supply chain readies for a sharp inflection in demand for 737MAX or A320neo applications, looking beyond negative near-term earnings expectations. As such, we are changing ratings on a few companies that fit into that description. Today, we are formally upgrading Hexcel Corporation (HXL) and Haynes International (HAYN) to Strong Buy investment ratings and moving Allegheny Technologies (ATI) over to Outperform. We had previously rated all three Hold. Continue reading

Steel Coverage Group: