Aerospace products and parts manufacturing (APPM) is a high-tech industry that operates in the Industrials sector. The cyclical industry primarily serves military and defense systems, scientific exploration, and commercial businesses. These companies, such as Boeing (BA) and Raytheon Technologies (RTX), manufacture civilian and armed forces aircraft and various parts and systems and remain competitive through R&D funding. The industry’s concentrated client base is the US Department of Defense, commercial airlines, space travel, and other niche groups.
The APPM industry’s revenue sources are civilian aircraft (60%), military aircraft (25%), and other sources (15%).1 Companies in this industry depend on a functional supply chain because their businesses rely on metal materials such as titanium, aluminum, and steel. The manufacturing activities in the industry use high-grade materials to weld, fabricate, and prepare highly specific metal designs to fulfill contract orders.
As it shows signs of independence of economic growth, the APPM industry is cyclical, conforming to volatile demand. The companies depend on air travel demand, government needs and funding, and market and political influences. Airbus forecasts passenger air travel demand to experience a 3.6% annual growth over the next 20 years.2 Oil and energy prices, interest rates, technological innovation, government regulation, and raw material prices drive the industry.1
Company size is enough to give a sizable competitive edge in the industry. Over 90% of the industry’s revenue comes from its top 50 firms.1 Based on industry data, APPM companies tend to be volatile and concentrated but high-tech. First State Investment Advisors maintains a significant position in Industrials stocks Boeing (BA), Raytheon Technologies (RTX), Deere & Co (DE), Honeywell (HON), and Caterpillar (CAT) for its client portfolios.
For professional financial planners, contact First State Investment Advisors at (918) 492-1361.
Sources
1First Research Industry Profile — Aerospace Products & Parts Manufacturing (oclc.org) (Accessed Jan 3, 2023)
2Global Market Forecast | Airbus (Accessed Jan 3, 2023)
This overview is for informational purposes only and is not a recommendation. It should not be the sole deciding factor in making an investment. Investing is a risk and, as with all risks, a positive return is not guaranteed. Past performance does not indicate future results.