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JPMorgan Upgrades Raytheon, Spirit AeroSystems, Says Aerospace 'More Investable'

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JPMorgan Upgrades Raytheon, Spirit AeroSystems, Says Aerospace 'More Investable'

Monday's encouraging coronavirus vaccine news from Pfizer Inc. (NYSE: PFE) sparked a rally in aerospace stocks. 

Even after Monday's rally, the group is "more investable" — and investor interest will grow, according to JPMorgan.

The Analyst: Seth Seifman upgraded Raytheon Technologies Corp (NYSE: RTX) from Neutral to Overweight with a price target lifted from $66 to $79.

The analyst also upgraded Spirit AeroSystems Holdings, Inc. (NYSE: SPR) from Neutral to Overweight with a price target lifted from $26 to $36.

Vaccine Focus: Pfizer's statement that its COVID-19 vaccine appears to be 90% effective in a study could represent a "turning point" for the aero industry, Seifman said in a Tuesday upgrade note.

While the exact timing of an industry inflection point remains unclear, investors are more willing to buy shares today and wait for the eventual recovery, the analyst said. 

Related Link: Spirit AeroSystems Analyst Sees Benefits From Return of Boeing's 737 MAX

The Raytheon Thesis: Raytheon is a combined aerospace and defense company, but the aerospace unit will "dominate" a valuation expansion as the sector recovers in the coming years, he said.

This would be consistent with historical norms, as aerospace has been the main focus for Boeing Co (NYSE: BA), Seifman said. 

Raytheon is also expected to return cash to investors through dividends and buybacks, while longer-term catalysts include the recovery of Pratt and Collins in 2022, with "significant growth" to follow in 2023, the analyst said. 

The Spirit AeroSystems Thesis: Boeing's ramp of its 737 MAX planes will "take time," but represents a multiyear catalyst for Spirit AeroSystems, he said. 

Encouragingly, Spirit's contracts to make parts for the MAX are set through 2033, and if the aircraft maker has to accept less favorable deals from airlines, it is a "Boeing issue," Seifman said. 

RTX SPR Price Action: Shares of Raytheon were trading 3.45% higher at $67.21 at last check Tuesday, while Spirit AeroSystems shares were up 8.37% at $29.

Latest Ratings for RTX

DateFirmActionFromTo
Dec 2020DZ BankUpgradesHoldBuy
Nov 2020JP MorganUpgradesNeutralOverweight
Oct 2020Credit SuisseMaintainsOutperform

View More Analyst Ratings for RTX
View the Latest Analyst Ratings

 

Related Articles (SPR + RTX)

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Posted-In: 737 MAX aerospace Coronavirus Covid-19Analyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

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