March 29, 2018 / 10:40 AM / 8 months ago

BUZZ-U.S. aero & defense sector still underestimated - Barclays

** Barclays starts coverage of aero and defense sector with “positive”, saying current expectations are too low as industry fundamentals are set to deliver accelerating growth vs. consensus

** Aero set for “synchronized strength” from aftermarket and new sales in a sustainable cycle as recent demand strength has pushed oversupply risks “well to the right,” analysts led by David Strauss write

** Barclays say there is a 40 pct gap between weapons budget and flow-through to companies currently, which they estimate will be bridged through 2020, yielding ~10 pct rev CAGR

** Favors Boeing, Spirit AeroSystems in OEMs, TransDigm in aftermarket, Textron in biz jets and Allegheny and Bombardier in “self help”

** In defense, broker sees General Dynamics, Northrop Grumman as fastest growing large-caps, call L3 Tech “top pick” and Huntington Ingalls “too cheap”

Reporting by Savio D'Souza

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