U.S. aerospace and defense companies are entering the fourth quarter earnings season with favorable fundamentals across commercial aviation, defense and aftermarket services, according to a research note on Thursday from Susquehanna Financial Group.
The firm said it has raised price targets across much of its coverage universe, citing improving production stability at aircraft manufacturers, resilient aftermarket demand and sustained government defense spending. The outlook applies to a broad group of companies including Boeing (BA), GE Aerospace (GE) and Raytheon Technologies (RTX).
In commercial aerospace, the analyst said Boeing (BA) has made meaningful progress in stabilizing production on its 737 and 787 programs. With the Spirit AeroSystems acquisition completed and production recovering, investor focus is expected to shift toward 777X certification and the pace of free cash flow improvement over the next several years.
Susquehanna added that stronger conditions at original equipment manufacturers are benefiting the broader supply chain. The firm expects improving revenue visibility and margin expansion to support earnings and free cash flow growth in 2026 and 2027, particularly for suppliers and engine makers.
On the defense side, the research note points to multiple tailwinds. These include several years of book-to-bill ratios above one, a U.S. administration supportive of higher defense budgets and commitments by NATO allies to increase military spending. Recent legislation also reinforces the outlook for sustained growth, the analyst said.
“We believe we are in the midst of a highly favorable aerospace and defense spending upcycle,” wrote analyst Charles P. Minervino, citing improving visibility and rising free cash flow across much of the sector.
While valuations across the sector have expanded, Susquehanna cautioned that near-term earnings results may face heightened scrutiny. Still, the firm said the medium-term setup remains attractive, supported by strong demand trends and improving operational execution.
Positive-rated on (ATI), (BA), (GD), (GE), (HWM), (LHX), (LMT), (NOC), (RTX), (SARO) and (TXT).
Neutral-rated on (SPCE) and (TDG).