Boeing And Other Top Picks In Aerospace And Defense From Drexel Hamilton

Drexel Hamilton picked up Boeing Co BA in the overall aerospace and defense segment.

On the commercial side, the brokerage picked up Woodward Inc WWD, Esterline Technologies Corporation ESL and Barnes Group Inc. B. L-3 Communications Holdings, Inc. LLL and Harris Corporation HRS are the brokerage's picks on the defense side.

Analyst Pete Skibitski is not worried about the underperformance of Boeing in the year-to-date period, which witnessed 7.9 percent drop in performance. The confidence is supported by expected higher unit margins for 787 providing enough catalyst to reignite investors' interest.

The brokerage sees the stock as moving around the quarter compared to the intra-quarter based on weak flow of orders moving ahead. The lead analyst termed KC-46 LRIP approval as a positive one for the stock.

As far as the commercial side, Skibitski sees the growth in global air traffic to be in line with the historical average of 5 percent and was not worried about the moderation of air traffic.

"We favor suppliers like WWD and B particularly given their $ content gains on next-generation narrowbody engines that should ramp meaningfully over the next few years. ESL, in our mind, is a margin recovery story," the analyst wrote.

Similarly, on the defense side, the analyst rated Lockheed Martin Corporation LMT as the top pick. However, the analyst believes that L-3 and Harris could outperform. The confidence was supported by L-3 regaining its stride, while investors see growth potentials in FY18 in Harris' case.

At Time Of Writing...

• Harris Corporation was up 1.08 percent on the day, at $90.78.
• L-3 was up 2.36 at $150.99.
• Lockheed Martin was up 0.75 percent at $266.27.
• Boeing was up 1.4 percent at $134.97.

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