Top 5 Aerospace Defense Equipment Stocks for Second-Half 2024

The aerospace defense equipment industry has maintained its northbound journey amid supply-chain woes. Nevertheless, improving defense budget funding from the U.S. administration and impressive year-over-year projections for global air passenger numbers are likely to boost this space in the second half of 2024.

The aerospace defense equipment industry comprises companies that primarily design and manufacture heavy-built products like commercial as well as military jets and helicopters, tankers and other combat vehicles, missiles, combatant ships as well as auxiliary ships, submarines, bombs, guns, space transportation vehicles, military satellites and a few more.

The industry stood its ground on the back of steady government support. Importantly, in March 2024, the fiscal 2025 defense budget request was submitted by President Joe Biden. This included a funding proposal of $849.8 billion for the U.S. Department of Defense, which reflected a 1% increase from the fiscal 2024 enacted funding amount.

Steadily improving global air traffic data in recent times has been boosting the near-term growth prospects of the industry. As stated in the latest report published by the IATA in June, total travelers are expected to reach 4.96 billion in 2024 — a record high. Total revenues are expected to reach $996 billion in 2024 — a record high, reflecting an improvement of 9.7% year over year.

The Zacks-defined Aerospace – Defense Equipment Industry is currently in the top 14% of the Zacks Industry Rank. In the past year, the industry has provided 28.1% returns, while its year-to-date return is 15.2%. Since it is ranked in the top half of Zacks Ranked Industries, we expect the consulting services industry to outperform the market over the next three to six months.

Our Top Picks

We have narrowed our search to five aerospace defense equipment stocks that have strong growth potential for the rest of 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks sports either a Zacks Rank #1 (Strong Buy) or 2 (Buy).

The chart below shows the price performance of our five picks year to date.

Image Source: Zacks Investment Research

Elbit Systems Ltd. ESLT develops and supplies a portfolio of airborne, land, and naval systems and products for defense, homeland security, and commercial aviation applications primarily in Israel, North America, the Asia-Pacific, Europe, Latin America, and internationally.

ESLT operates through five segments: Aerospace; C4I and Cyber, Intelligence, Surveillance, Target Acquisition and Reconnaissance and Electronic Warfare, Land, and Elbit Systems of America.

Zacks Rank #1 ESLT has an expected revenue and earnings growth rate of 7.3% and 11.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 17.7% over the last 30 days.

AerSale Corp. ASLE provides aftermarket commercial aircraft, engines, and parts to passenger and cargo airlines, leasing companies, original equipment manufacturers, and government and defense contractors, as well as maintenance, repair, and overhaul service providers worldwide. ASLE operates in two segments, Asset Management Solutions and Technical Operations (TechOps).

Zacks Rank #1 ASLE has an expected revenue and earnings growth rate of 13.2% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11.4% over the last 60 days.

AAR Corp. AIR provides various products & services to the aviation & defense industries worldwide. AIR's principal customers are The Boeing Co. and Airbus. AIR has two business segments: Aviation Services and Expeditionary Services.

Zacks Rank #2 AAR has an expected revenue and earnings growth rate of 17.2% and 24.1%, respectively, for the current year (ending May 2025). The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 60 days.

HEICO Corp. HEI has witnessed improved demand for its commercial aerospace products and services in the last couple of quarters, buoyed by a recovery in commercial air travel. The expectation of continued recovery in domestic and international travel demand bodes well for HEI's growth in the coming days.

HEI's disciplined acquisition strategy has also been driving its overall performance. Wencor's takeover has boosted HEI's position in the aircraft aftermarket space. The stock has a strong solvency position in the short run.

Zacks Rank #2 HEICO has an expected revenue and earnings growth rate of 30.3% and 15.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last seven days.

Curtiss-Wright Corp. CW is a diversified multinational company that designs and overhauls precision components. CW provides highly engineered products and services for high-performance platforms, and critical applications in key areas such as commercial aerospace and defense electronics, reactor coolant pumps for next-generation nuclear reactors as well as advanced surface treatment technologies.

CW's products & services are offered to the aerospace, defense, general industrial and power generation markets. CW has three business segments: Aerospace & Industrial, Defense Electronics, and Naval & Power.

Zacks Rank #2 Curtiss-Wright has an expected revenue and earnings growth rate of 6.3% and 9.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 60 days.

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