Core Insights - Aerospace-Defense Equipment stocks are expected to benefit from strategic mergers and acquisitions that enhance operational scale and market presence, despite ongoing supply-chain challenges affecting aircraft deliveries and profitability [1][3][5] Industry Overview - The Zacks Aerospace-Defense Equipment industry includes companies that manufacture essential components for aerospace and defense, such as aerostructures, propulsion systems, and defense electronics, while also providing aftermarket support and services [2] Trends Influencing the Industry - Mergers and Acquisitions: Recent acquisitions, such as TransDigm's purchase of Simmonds Precision Products for $765 million and AAR Corp.'s acquisition of American Distributors for $146 million, are expected to improve economies of scale and revenue growth across the industry [3] - Air Traffic Growth: Global air passenger traffic increased by 4.6% year-over-year in August 2025, with projections of a 5.8% growth for 2025, indicating a positive outlook for aerospace and defense companies serving the commercial aviation market [4] - Supply-Chain Disruptions: Ongoing supply-chain issues have led to aircraft deliveries being approximately 30% below previous peaks, resulting in a backlog of 17,000 units, which may hinder production and profitability in the near term [5] Industry Performance - The Zacks Aerospace-Defense Equipment industry has outperformed both the S&P 500 and the broader Aerospace sector, with a collective stock increase of 37.3% over the past year compared to 25.7% for the sector and 18.1% for the S&P 500 [8] Valuation Metrics - The industry is currently trading at a trailing 12-month EV/Sales ratio of 11.49X, significantly higher than the S&P 500's 5.73X and the sector's 3.43X, indicating strong market valuation [10] Notable Companies - **Curtiss-Wright Corp. (CW)**: This company focuses on high-performance products for aerospace and defense, with a projected 9.7% sales growth and 18.4% earnings growth for 2025. It has announced a $200 million expansion of its share repurchase program [13][14] - **Leonardo DRS, Inc. (DRS)**: Specializing in advanced defense technologies, DRS is expected to see a 10.9% increase in sales and 19.4% growth in earnings for 2025, bolstered by the launch of new AI-enabled display systems [17][18] - **BWX Technologies (BWXT)**: This company provides nuclear solutions and has secured a $1.6 billion contract from the Department of Energy, with projected sales growth of 15.1% and earnings growth of 11.7% for 2025 [20][21]

Core Insights - Aerospace-Defense Equipment stocks are expected to benefit from strategic mergers and acquisitions, enhancing operational scale and market presence, despite ongoing supply-chain challenges affecting aircraft deliveries and profitability [1][3][5]. Industry Overview - The Zacks Aerospace-Defense Equipment industry includes firms manufacturing essential components for aerospace and defense, such as aerostructures, propulsion systems, and defense electronics, while also providing aftermarket support services [2]. Trends Shaping the Industry - Recent mergers and acquisitions, such as TransDigm's $110 million acquisition of Servotronics and Teledyne's acquisition of Maretron assets, are expected to improve economies of scale and revenue growth [3]. - Global air passenger traffic is projected to grow by 5.8% year-over-year in 2025, indicating strong growth potential for aerospace-defense equipment stocks, particularly in commercial aviation [4]. Supply Chain Challenges - Supply-chain disruptions are impacting aircraft deliveries, with current deliveries 30% below peak levels, contributing to a backlog of 17,000 aircraft, which represents an 18% shortfall of the active global fleet [5]. Industry Performance - The Zacks Aerospace-Defense Equipment industry has outperformed both the S&P 500 composite and its sector, with a collective stock surge of 46.2% over the past year compared to 27.1% for the Aerospace sector and 10.9% for the S&P 500 [8]. Valuation Metrics - The industry is currently trading at an EV/Sales ratio of 11.14X, significantly higher than the S&P 500's 5.41X and the sector's 3.27X, indicating a premium valuation for capital-intensive aerospace-defense stocks [11]. Notable Companies - **Heico Corp.**: Expected to see a 13.3% sales improvement in fiscal 2025, with a long-term earnings growth rate of 17.6% [15][16]. - **AAR Corp.**: Anticipated 17.2% sales growth in fiscal 2025, with a Zacks Rank of 2 (Buy) [17][18]. - **Curtiss-Wright**: Projected 8.8% sales growth in fiscal 2025, recently awarded an $80 million contract by the USAF [20][22].