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Investing.com -- Morgan Stanley reaffirmed its bullish stance on the aerospace and defense sector in a note Thursday, calling it a “triple threat” that is “China, tariff, and recession proof.”
The firm raised price targets across its coverage ahead of second-quarter results.
In a note, the bank stated that the recent multiple expansion “reflects sector resilience” and argued that “supply/demand dynamics remain favorable.”
Aerospace stocks, now trading at a 39% premium to the S&P 500 on a forward EV/EBITDA basis, have outpaced expectations since Liberation Day, notes Morgan Stanley (NYSE:MS).
“In our view, this multiple expansion reflects the triple threat that is Aerospace as an industry,” Morgan Stanley wrote.
The analysts said they continue to prefer stocks with both aftermarket and original equipment exposure, highlighting Overweight-rated names including TransDigm, Howmet, RTX, and Loar.
“We see these companies well-positioned to react to disruptions in the industry from tariffs or unforeseen events,” the note said.
Price targets were raised for several companies, including TDG (to $1,750), HWM (BMV:HWM) (to $210), RTX (to $165), and Boeing (NYSE:BA) (to $235), reflecting improved supply chains and strong air traffic demand. “Output from Boeing continues its strong momentum,” the note added.
On defense, Morgan Stanley said the market underappreciates the sector’s resilience, despite favorable budget trends.
“We continue to see attractive value in Defense,” the analysts said, singling out Lockheed Martin (NYSE:LMT) and Northrop Grumman (NYSE:NOC) as Overweight-rated names benefiting from modernization efforts and expanding missile-related programs.
With global tensions rising, Morgan Stanley sees this sector as well-insulated and still offering upside.