Al Root
Aerospace and defense stocks have both been beaten up by the Iran war, especially higher oil prices. Now, commercial aerospace is a better bet than defensestocks, according to Wells Fargo.
Analyst David Strauss launched coverage of the sector on Wednesday.
"We see further aero outperformance on strong relative earnings per share growth that more than offsets potential valuation downside," he wrote.
Strauss figures earnings can double by the end of the decade, driven by chronic undersupply of new planes, despite rising oil prices.
Boeing and Airbus delivered an average of 1,500 planes a year in 2016, 2017, and 2018. That collapsed to fewer than 1,000 in 2020 and 2021. The pair delivered almost 1,500 jets in 2025, and deliveries are expected to grow to 1,900 by 2028.
"Defense has upside to growth expectations, while valuation is reasonable in [the] context of prior periods of high budgets and heightened geopolitics," he said.
After the midterm elections, however,
budget outlooks will get "more difficult" and large contractors will face " heightened competition along with increased CapEx demands that could negatively affect free cash flow and shareholder returns."
Military spending around the globe is increasing, but traditional prime contractors are facing competition from so-called neo-primes that want to disrupt the sector with low-cost, autonomous battle systems.
Four commercial aerospace stocks he rates Buy are engine makers GE Aerospace, Rolls-Royce, parts supplier Woodward, and Boeing.
"GE has significantly exceeded its margin forecast over the last several years, and we see further upside," he wrote.
Strauss sees GE's LEAP engine, which powers the A320 family of aircraft and the Boeing 737 MAX, becoming more profitable than the older CFM56 engines.
His price target for GE is $325. The stock was up 3.8% at $294.42 in midday trading; the S&P 500 and Dow Jones Industrial Average were up 1.1% and 0.9%, respectively.
For Boeing, Strauss has a $250 price target. Shares were at $209, up 5%, in midday trading. His Woodward product is $440. Shares were at $377.04, up 5.3%. His Rolls-Royce target is GBP13.50. Shares were at GBP12.07 in overseas trading, up 6.6%.
Northrop Grumman is Strauss' favorite defense contractor. The company "has invested ahead of need relative to peers, and we think [it] outgrows," he wrote.
The U.S. government is looking to dramatically increase the production of missiles and drones. Northrop makes a lot of those, including the Global Hawk drone and SiAWs, or Stand-in Attack Weapons.
His Northrop target price is $800. Shares were at $701.09, up 2.8%, in midday trading.
Strauss' aerospace picks are popular with his peers. Overall, 84% of analysts covering GE Aerospace, Woodward, Rolls, and Boeing rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 typically ranges from 55% to 60%.
Northrop's support looks reasonable, with 54% of analysts rating its stock Buy.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 01, 2026 13:11 ET (17:11 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments