This aerospace stock could benefit big from Boeing’s struggles, says portfolio manager
GE Aerospace will emerge as Boeing’s ongoing manufacturing woes plague it, according to Chris Smith of Artisan Partners. “GE has really become a monopoly with their new Leap engine, which will power all new narrow-body aircraft,” which could account for more than 80% of the engines in the air over the next decade, according to Antero Peak Group portfolio manager at Artisan. Delivery delays following Boeing’s 737 Max 9 flap explosion in January are forcing airlines to service older planes and are fueling pent-up demand for GE products, Smith said. He sees GE as a “top” industrial stock, but he also highlights aircraft components maker TransDigm as another beneficiary. Aerospace and defense stocks have been broadly higher in 2024, hitting new highs as global geopolitical tensions have risen. The iShares U.S. Aerospace and Defense ETF (ITA) is up nearly 16% this year. GE shares are up 70% in 2024, while TransDigm is up 35%. Boeing shares have struggled this year, falling 34% in 2024 as the company faces increased scrutiny following an explosion earlier this year. The company reported a larger-than-expected loss in the second quarter in late July, while revenue also missed targets. Smith also sees GE as a beneficiary of reinvestment in U.S. manufacturing after decades of outsourcing. “You’re seeing a significant acceleration in the buildout of manufacturing as you have this deglobalization and the supply chain is moving closer to home,” he said.
