LOS ANGELES (AP) — Aircraft production and demand for spare parts will increase next year, as carriers move to replace aging fleets with more fuel-efficient jets, analysts for Sterne Agee forecast in a client note Tuesday.
The projected ramp-up in manufacturing makes aerospace stocks an attractive buy at current prices, analysts Peter Arment and Josh Sullivan wrote.
The analysts' top stock picks for the sector include Boeing Co., BE Aerospace Inc., Precision Castparts Corp. and Triumph Group Inc.
Despite concerns about Europe's debt crisis and slowing growth in China and the U.S., Arment and Sullivan expect air traffic will continue to grow globally next year. That will help drive demand for spare parts and new aircraft models that are more fuel-efficient, the analysts said.
Their forecast calls for production at Boeing Co. and Airbus to rise by 19 percent next year and by 39 percent through 2014.
The analysts anticipate that established aircraft models, such as Boeing's 737, 777 and the Airbus A320, will continue to drive revenue and profit margins for the aerospace industry. They say it's unlikely that production of Boeing's 787 will generate significant sales for aircraft suppliers until the second half of next year.
Arment and Sullivan also expect the market for business jets to pick up next year.
That market has remained healthy, and there's evidence that the low end of the business jet market is beginning to stabilize and will turn modestly positive by the end of next year, the analysts said.
They forecast that global business jet deliveries will rise only 2 percent to 705 aircraft next year, with demand for high-end jets like the Gulfstream G650 driving sales.
The analysts issued their note before American Airlines' parent company, AMR Corp., filed for Chapter 11 bankruptcy protection on Tuesday.
AMR said it wants to go forward with plans to order 460 new jets from Boeing and Airbus, plus more than 50 previous jet orders. New planes would save American money on fuel and maintenance, but the orders will be subject to approval by the bankruptcy court.
Aerospace company stocks were mixed in afternoon trading.
Boeing rose 16 cents to $65.15, while United Technologies Corp. added 5 cents at $73.19.
Honeywell International Inc. gained 6 cents at $51.72, and Spirit AeroSystems Holdings Inc. rose 4 cents to $18.68.
Elsewhere in the sector, Triumph Group lost 50 cents at $55.13; BE Aerospace fell 40 cents to $36.91; Precision Castparts rose 14 cents to $159.07; and, Rockwell Collins Inc. fell 9 cents to $53.15.
AMR shares fell $1.27, or 78.2 percent, to 35 cents.