Sept. 21, 2016: Today’s weekly analyst synopsis includes commentary on the US presidential election on defense stocks; some updates about Boeing and its recent appearance before the Morgan Stanley conference; and improvements at Zodiac, which affect Airbus.

Analysts continue to believe Boeing will further cut the 777 Classic production rate, with an annoucnement toward the end of this year.

Bernstein Research

General update, September 15, 2016

We see November elections as likely to support a growing DoD budget that is already set to grow. We are skeptical, however, that either candidate would be able to break through Congressional gridlock. With our current view of low to mid-single digit growth for DoD spending, we see defense stocks as generally at fair value, particularly when pensions are considered. We prefer General Dynamics (valuation, Gulfstream issues priced in) and Raytheon (international exposure), and BAE Systems (valuation) and rate each Outperform.

Buckingham Research

Weekly Insights, Sept. 19, 2016

Zodiac reported F4Q results noting a substantial increase in lavatory production rates to 7/mo in August – consistent with the rate Airbus needs to achieve 50 deliveries by year end. Despite the improvement, we see risk to Airbus’ guide for 50 A350 deliveries this year. Under coverage, HXL and SPR are most impacted by the A350 with each having a shipset content of $5M.

Morgan Stanley

Airlines and A+D Update, Sept. 19, 2016

Boeing (via its CEO) provided a comprehensive update that pointed to deliveries growing in 2017 but with flattish revenues, orders concentrated in narrow-bodies over wide-bodies with a book to bill remaining roughly at 1x, and cash flow growth in an even punitive environment (i.e. with a 777 cut announcement that appears more probable later in the year), all of which helped our OverWeight rating. Elsewhere, SPR (OW) supported growing cash flow and manageable 737 rate increases, all while a resolution over BA negotiations appeared to be in the works.