Monty Rakusen
Textron (NYSE:TXT) is a key player in the aerospace and defense sector as it prepares to unveil its earnings. Goldman Sachs, known for its astute analyses, has designated the industrial conglomerate, with its eminent aviation brands such as Bell helicopters and Cessna, as a ‘Buy’ stock. Notably, it has also appeared on the prestigious Conviction List of the financial services firm.
Other stocks earmarked with a ‘Buy’ rating and poised for observation are TransDigm Group (NYSE:TDG), Woodward (NASDAQ:WWD) and Leidos (NYSE:LDOS). In contrast, Mercury Systems (NASDAQ:MRCY) has been labeled as a ‘Sell’ by Goldman Sachs.
In a January 16 report, Noah Poponak, an analyst at Goldman Sachs, highlighted significant industry trends heading into 2024. These include robust demand for commercial aircraft, aftermarket services, and business jets. However, the bank urges caution amidst budget deliberations in the Washington defense sector.
Textron (TXT): “The stock continues to price in concern that business jet demand will soften, but we believe book-to-bill will remain resilient, while new jet supply remains tight. Investor feedback to our Conviction List addition of Textron (TXT) included a lot of skepticism including around the initial 2024 guide, which suggests the bar is low.”
Transdigm (TDG): “We see upside to consensus estimates, as TransDigm (TDG) continues to deliver industry leading operational execution, on top of strength in aerospace aftermarket units and price. TransDigm (TDG) already has next fiscal year guidance, such that concern of initial conservatism is less of a factor vs others.”
Woodward (WWD): “Woodward (WWD) has also already provided next fiscal year guidance, and it looks very conservative to us, allowing the company room to beat and raise through the year. We estimate that aerospace and industrial inputs remained strong in the quarter, as new management continues to improve operational performance.”
Leidos (LDOS): “New management at Leidos (LDOS) is driving operational improvement, on top of a very strong recent new order win rate. We expect that to translate to revenue and margin upside compared to consensus expectations, while valuation remains at a discount to the peer group.”
Mercury (MRCY): “Full-year guidance and consensus estimates at Mercury (MRCY) embed a quick turnaround in financial performance, while we see risk that takes longer or will settle out at lower levels.”
