How These 5 Aerospace Stocks Earn Money Beyond New Plane Sales
The aerospace market can be broadly split into two groups: original equipment manufacturers (OEMs) and aftermarket companies. While the OEM companies are the most highly visible, the latter are often the most profitable and relatively more stable due to a stream of recurring revenue that can last decades in some cases. Here's a look at five companies with heavy aftermarket exposure, namely GE Aerospace (NYSE: GE) , TransDigm Group (NYSE: TDG) , Loar Holdings (NYSE: LOAR) , AAR Corp (NYSE: AIR) , and RTX (NYSE: RTX) . GE Aerospace's joint venture with Safran , CFM International, is the dominant player in the aircraft engine market, with its LEAP engine used on both the Boeing 737 MAX (the sole option) and on the Airbus A320neo family (RTX's Pratt & Whitney also provides an engine). These two narrow-body airplanes are the workhorses of the skies. GE Aerospace also has the GEnx engine on the Boeing 787 Dreamliner and the GE9X engine on the upcoming Boeing 777X. It's an extremely powerful position, and as Boeing and Airbus aggressively ramp production to try to deliver on their multi-year backlogs, GE/CFM will grow their installed base of engines. That's great news for long-term profitability, because although new engines are usually sold at a loss, they can generate more than 40 years of lucrative aftermarket revenue as engines come in for "shop visits" and are overhauled. Continue reading