Benzinga | Dec 31, 2021 10:20AM EST

Morgan Stanley's Top Picks In Aerospace For 2022

* Morgan Stanley analyst Kristine Liwag says Aerospace stocks are not pricing in recovery as sentiment is negative, and stocks are trading at about a 27% discount to normalized 2019 levels.

* The analyst named TransDigm Group Inc (NYSE:TDG), her top pick in Aerospace in North America for 2022. She has an Overweight rating and a price target of $762 (an upside of 20.12%) on the company.

* Liwag views TransDigm as a pureplay on the aftermarket and sees the potential for upside to her and consensus estimates depending on the pace of an air traffic recovery.

* In terms of Defense, Liwag named Northrop Grumman Corp (NYSE:NOC) as her "preferred Defense prime," calling it her "preferred way to play the Great Power Competition theme in 2022."

* She is particularly bullish on the company's space portfolio and sees an additional runway for growth there. Liwag has an Overweight rating and a $440 (an upside of 14%) price target on Northrop shares.

* Liwag also argues that Northrop today is similar to Lockheed Martin Corp (NYSE:LMT) a decade ago with the F-35 given its position as the prime contractor for the B-21 bomber and Ground-Based Strategic Deterrent put it "on the cusp of major platform-fueled growth."

* She has an Overweight rating and a price target of $430 (an upside of 22%) on Lockheed Martin shares.

* Price Action: TDG shares traded higher by 0.10% at $635.06, NOC higher by 0.11% at $384.94, and LMT lower by 0.27% at $352.62 on the last check Friday.