Sands Capital, an investment management company, released its “Sands Capital Select Growth Strategy” Q3 2025 investor letter. A copy of the letter can be downloaded here. U.S. large-cap growth equities continued to recover from a sharp sell-off in early April. Strong corporate earnings, investor enthusiasm around artificial intelligence (AI), and growing expectations for Federal Reserve policy easing drove the robust gains. The portfolio returned 6.3% in the quarter, outperforming the benchmark Russell 1000 ...

Core Insights - Increasing global air travel and the need for maintenance, repair, and overhaul (MRO) services support demand in the aerospace sector, with RTX Corporation (RTX) being a key player through its Collins Aerospace business due to its technical expertise and global MRO network [1][4] - RTX is facing supply-chain challenges and cost pressures that may cause short-term delays in MRO work, but the long-term outlook remains stable as airlines prioritize reliability and operational efficiency [2][4] MRO Agreements and Developments - Collins Aerospace expanded its partnership with Emirates in November 2025 for the maintenance of A380 main landing gears, introducing an improved support program to enhance overhaul availability [3] - Qatar Airways selected Collins Aerospace's Ascentia analytics solution for its fleet of 52 Boeing 787 aircraft, which utilizes real-time data to predict component health and reduce unscheduled maintenance [4] Market Performance - RTX shares have increased by 46.6% over the past year, outperforming the industry average growth of 21.9% [8] - The company's shares are currently trading at a forward 12-month Price/Earnings ratio of 26.21X, which is lower than the industry's average of 28.16X [10] Earnings Estimates - The Zacks Consensus Estimate for RTX's earnings for 2025 and 2026 has seen upward revisions over the past 60 days, indicating positive sentiment [11]

Core Insights - Mercury Systems (MRCY) reported quarterly earnings of $0.26 per share, significantly exceeding the Zacks Consensus Estimate of $0.08 per share, marking a year-over-year increase from $0.04 per share, resulting in an earnings surprise of +225.00% [1] - The company achieved revenues of $225.21 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 8.78% and showing growth from $204.43 million in the same quarter last year [2] - Mercury Systems has outperformed the S&P 500, with shares increasing approximately 85.2% year-to-date compared to the S&P 500's gain of 16.5% [3] Earnings Outlook - The future performance of Mercury Systems' stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4] - The current consensus EPS estimate for the upcoming quarter is $0.14 on revenues of $224.57 million, and for the current fiscal year, it is $0.90 on revenues of $942.65 million [7] Industry Context - The Aerospace - Defense Equipment industry, to which Mercury Systems belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, indicating potential challenges ahead [8] - The performance of Mercury Systems may also be influenced by the overall outlook for the industry, as historical data shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

Core Insights - U.S. stock markets are experiencing significant gains in 2025, with major indexes like the Dow, S&P 500, and Nasdaq Composite up 10.3%, 14.4%, and 18.2% year-to-date, respectively, nearing all-time highs [1][8] Stock Performance - A weak labor market has led to expectations that the Federal Reserve will continue to lower the benchmark lending rate throughout 2025, although the recent U.S. government shutdown may dampen investor enthusiasm [2] - Five stocks identified as having strong price momentum are Century Aluminum Co. (CENX), DRDGOLD Ltd. (DRD), Globalstar Inc. (GSAT), TAT Technologies Ltd. (TATT), and Sterling Infrastructure Inc. (STRL) [3][8] Stock Screening Criteria - Stocks must show a percentage change in price greater than zero over the last four weeks and greater than 10% over the last twelve weeks to indicate sustained momentum [5] - Stocks should have a Zacks Rank of 1 (Strong Buy) and an average broker rating of 1, indicating strong future performance expectations [6] - Stocks must be trading at a minimum price of $5 and be within 85% of their 52-week high to ensure they are strong performers [7] Individual Stock Highlights - **Century Aluminum Co. (CENX)**: Stock price increased by 35.2% in the last four weeks, with an expected earnings growth rate of 77.4% for the next year [10] - **DRDGOLD Ltd. (DRD)**: Stock price rose by 34.9% in the last four weeks, with an expected earnings growth rate of -0.7% for the current year [11] - **Globalstar Inc. (GSAT)**: Stock price climbed 34.9% in the last four weeks, with an expected earnings growth rate of 66.7% for the current year [14] - **TAT Technologies Ltd. (TATT)**: Stock price surged 24.9% in the last four weeks, with an expected earnings growth rate of 45% for the current year [16] - **Sterling Infrastructure Inc. (STRL)**: Stock price advanced 22.2% in the last four weeks, with an expected earnings growth rate of 56.9% for the current year [19]

Core Insights - The aerospace and defense sector continues to attract investment due to rising global defense spending, which reached a record $2.3 trillion last year, increasing over 8% and expected to maintain momentum into 2025 [1][2]. Company Performance - GE Aerospace and Howmet Aerospace are leading in engineered solutions for defense and commercial aircraft, benefiting from a shift towards fuel-efficient aircraft as airlines upgrade their fleets [3]. - GE's revenue increased by 23% year-over-year in Q2 to $10.15 billion, driven by high demand for its LEAP GEnx and GE9X engines [4]. - Howmet reported record Q2 revenue of $2.05 billion, attributed to high demand for engine spares, achieving peak profits and cash flow [4]. - Both GE and Howmet are projected to experience high double-digit EPS growth in the foreseeable future, with GE holding a Zacks Rank 3 (Hold) and Howmet a Zacks Rank 2 (Buy) [5]. Niche Equipment Providers - Astronics and TAT Technologies have gained investor interest as specialized aerospace defense equipment providers [7]. - Astronics' stock has surged nearly 200% this year and currently holds a Zacks Rank 2 (Buy), with positive EPS revisions indicating further upside potential [8]. - TAT Technologies has also seen positive EPS revisions, maintaining a strong buy status, with its stock hovering near a 52-week high of over $40, up more than 70% year-to-date [8]. Valuation and Market Trends - Both Astronics and TAT Technologies trade at 27X forward earnings, which is a discount compared to the Zacks Aerospace-Defense Equipment Industry average of 34X and closer to the S&P 500 average [11]. - The overall performance of aerospace and defense stocks remains strong, making them attractive for potential buy-the-dip opportunities as global defense spending stays near record levels [12].

Core Insights - Axon Enterprise, Inc. has announced the acquisition of Prepared, an AI-powered emergency communications company, with financial terms undisclosed [1][8] - Prepared, established in 2019, provides AI tools to enhance public safety agencies' response capabilities, serving over 1,000 agencies across 49 states and nearly 100 million people [2] Acquisition Rationale - The acquisition aligns with Axon's strategy to expand market share and customer base, enhancing its public safety platform by integrating Prepared's AI toolbox [3] - The integration is expected to improve response times, decision-making capabilities, and operational efficiency for Axon's customers [4] Other Notable Acquisitions - In October 2024, Axon acquired Dedrone, enhancing its airspace security capabilities against drone threats [5] - In January 2024, Axon acquired Fusus, which improved real-time situational awareness in public safety [6] Financial Performance - Axon is experiencing growth across its business segments, particularly in Connected Devices, driven by demand for TASER 10 devices and virtual reality training services [7] - The stock has increased by 77.5% over the past year, outperforming the industry growth of 33.5% [7]

Core Viewpoint - AAR Corp. is experiencing significant stock performance, with a record high reached in July and a strong earnings growth trend over the past year, indicating potential investment opportunities in the aerospace and defense sector. Group 1: Stock Performance - AAR Corp. stock rose to a record high of 86.43 in late July, with a recent trading price just below 78 [1] - The stock's Relative Strength (RS) Rating improved from 67 to 71, outperforming 70% of all stocks but still below the desired 80 or higher rating [3] - AAR Corp. ranks No. 6 among 74 stocks in the Aerospace/Defense industry group, which itself ranks No. 28 out of 197 industries tracked [3][4] Group 2: Earnings Growth - AAR Corp. has shown consistent earnings growth over the past year, with quarterly earnings increasing from 9% to 11%, 16%, and then a 32% jump to $1.16 per share last quarter [2] - Sales growth has also been strong, ranging from a high of 26% to 15% last quarter, totaling $754.5 million [2] Group 3: Technical Ratings - AAR Corp. has achieved a Relative Strength Rating upgrade, indicating improving technical performance, with a recent jump to an 81 RS Rating [8] - The company is approaching key technical benchmarks, with a composite rating of 95-plus, indicating strong market leadership [8]

Core Insights - Increasing investments from global airlines in MRO services for aging fleets are driving growth for TAT Technologies Ltd. (TATT) [1] - Rising defense budgets are also contributing to the demand for military jet production and modernization, benefiting TATT [1] MRO Business Performance - In Q1 2025, TATT faced softer demand in its MRO business due to supply-chain challenges and order timing, leading to moderate MRO intake in Q2 [2] - Ongoing tariff-related uncertainties are expected to further pressure TATT's MRO business in the near term, with the CEO indicating potential quarter-to-quarter volatility [3] Recovery and Contracts - Since July 2025, TATT's MRO intake has begun to recover, supported by recent contract wins, which may lead to revenue increases by late 2025 or early 2026 [4] - In August 2025, TATT secured a $12 million contract for MRO services on Boeing 777 aircraft and signed an agreement with a global cargo carrier to extend APU repair work [5] Industry Trends - Other aerospace and defense companies, such as RTX Corporation and Boeing, are also expanding their MRO capabilities to meet rising global demand [6] - RTX's Pratt & Whitney unit announced a partnership to enhance its global MRO footprint, while Boeing has opened new distribution centers to support aviation maintenance [7] Stock Performance and Valuation - TATT shares have increased by 110.4% over the past year, outperforming the industry average growth of 35.5% [8] - The company's shares are trading at a forward Price/Sales ratio of 2.16X, significantly lower than the industry's average of 10.05X [10] - The Zacks Consensus Estimate for TATT's near-term earnings has improved over the past 60 days [11]

Group 1 - Futu Holdings Limited (FUTU) has a Zacks Rank 1 and its current year earnings estimate increased by 17.7% over the last 60 days [1] - Futu's shares gained 71.3% over the last three months, significantly outperforming the S&P 500's 9.6% advance, and it has a Momentum Score of A [2] Group 2 - TAT Technologies Ltd. (TATT) also holds a Zacks Rank 1, with a 10.7% increase in its current year earnings estimate over the last 60 days [3] - TAT's shares rose by 34.9% in the last three months, again outperforming the S&P 500, and it has a Momentum Score of A [4] Group 3 - Astronics Corporation (ATRO) has a Zacks Rank 1, with a 6.7% increase in its current year earnings estimate over the last 60 days [3] - Astronics' shares increased by 16.7% over the last three months, compared to the S&P 500's 9.6% advance, and it has a Momentum Score of B [4]

Core Insights - Three stocks with strong momentum and buy rank are highlighted for investors: TAT Technologies Ltd., Lumentum Holdings Inc., and Arista Networks, Inc. [1][2][3] Group 1: TAT Technologies Ltd. (TATT) - TAT Technologies is a provider of solutions and services to the aerospace and defense industries [1] - The Zacks Consensus Estimate for TAT's current year earnings increased by 10.7% over the last 60 days [1] - TAT's shares gained 21.9% over the last three months, outperforming the S&P 500's 11.4% increase [2] - The company has a Momentum Score of A [2] Group 2: Lumentum Holdings Inc. (LITE) - Lumentum is involved in optical and photonic products [2] - The Zacks Consensus Estimate for Lumentum's current year earnings increased by 20.5% over the last 60 days [2] - Lumentum's shares surged by 57.5% over the last three months, significantly outperforming the S&P 500's 11.4% increase [2] - The company also possesses a Momentum Score of A [2] Group 3: Arista Networks, Inc. (ANET) - Arista Networks specializes in cloud networking solutions [3] - The Zacks Consensus Estimate for Arista's current year earnings increased by 9.8% over the last 60 days [3] - Arista's shares rose by 46.1% over the last three months, again outperforming the S&P 500's 11.4% increase [3] - The company has a Momentum Score of A [3]