J.P. Morgan projects a largely optimistic future for aerospace, with varied indicators for defense.
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 21 2025
0mins
Source: SeekingAlpha
Aerospace Sector Outlook: J.P. Morgan anticipates strong support for aerospace and defense stocks through 2026, with commercial aerospace showing significant strength due to robust demand, production backlogs, and growth in global air traffic.
Preferred Stocks: Boeing, StandardAero, and ATI are highlighted as top picks in the aerospace sector, with Boeing expected to see increased cash flow as aircraft deliveries rise, while ATI benefits from diversifying away from Russian titanium.
Defense Sector Nuances: The defense sector outlook is more complex, with rising global military spending but uncertainties due to U.S. political dynamics. J.P. Morgan favors L3Harris Technologies and Leidos for their growth potential and attractive valuations.
Lockheed Martin Downgrade: J.P. Morgan downgraded Lockheed Martin to Neutral, citing concerns over long-term cash flow growth and execution issues, while emphasizing the need for selective investment in the defense sector due to potential risks.
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Analyst Views on GE
Wall Street analysts forecast GE stock price to rise
9 Analyst Rating
8 Buy
0 Hold
1 Sell
Strong Buy
Current: 332.760
Low
275.00
Averages
345.67
High
386.00
Current: 332.760
Low
275.00
Averages
345.67
High
386.00
About GE
General Electric Company, doing business as GE Aerospace, is a global aerospace propulsion, services, and systems company. It has an installed base of over 50,000 commercial and 30,000 military aircraft engines. Its segment includes Commercial Engines & Services and Defense & Propulsion Technologies. Commercial Engines & Services segment designs, develops, manufactures and services jet engines for commercial airframes, as well as business aviation and aeroderivative applications. Its services include maintenance, repair and overhaul of engines and the sale of spare parts and offers services under a variety of arrangements such as long-term service agreements, spare parts agreements or time and material contracts. Defense & Propulsion Technologies segment provides defense engines and critical aircraft systems and consists of Defense & Systems and Propulsion & Additive Technologies businesses. Its portfolio of brands includes Avio Aero, Unison, Dowty Propellers and Colibrium Additive.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- New Stock Additions: The fund added 1,148,700 shares of Boston Scientific, valued at approximately $72.08 million, representing 1.75% of the portfolio, reflecting optimism in the medical device industry.
- Key Position Increases: Elfun Trusts increased its stake in S&P Global by 47,560 shares, bringing total holdings to 222,549 shares, a 27.18% increase, demonstrating confidence in financial information services.
- Reduction Strategy: The fund reduced positions in 18 stocks, notably cutting 169,600 shares of Emerson Electric, a 25.49% decrease, reflecting a reassessment of the industry's outlook.
See More
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- Stock Decline: Palantir's shares have slid about 7% over the past five trading days, now trading over 35% below its 52-week high, reflecting market concerns about its future growth despite a year-to-date decline of approximately 26%.
- Accelerating Revenue Growth: Despite the stock drop, Palantir reported an 85% year-over-year revenue increase in Q1, reaching $1.63 billion, with U.S. revenue more than doubling and commercial revenue soaring 133%, indicating strong performance in the rapidly growing AI market.
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See More
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- Strong Demand: Despite a 20% rise in fares, airlines like Etihad Airways report ticket demand is on par with pre-conflict levels, indicating consumer resilience in a high-cost environment, although future winter demand remains uncertain.
- Growing Aircraft Orders: Orders for popular jets from Airbus and Boeing remain robust despite high fuel prices, with Etihad planning to add more than 10 aircraft to its existing order book, reflecting confidence in future growth.
- Engine Reliability Issues: Airlines express frustration over new-generation engines that promise fuel efficiency but require more unscheduled maintenance than expected, leading to increased costs in a high fuel price environment.
See More
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- Engine Reliability Issues: Airline CEOs at the industry gathering in Rio de Janeiro reported that new fuel-efficient engines have not met expected reliability standards, forcing carriers to conduct maintenance sooner than anticipated, which undermines the cost savings initially projected.
- Rising Maintenance Costs: The higher-than-expected failure rates of new engines have led airlines to face more frequent unscheduled maintenance, eroding the anticipated 15% fuel savings and negatively impacting overall profitability.
- Market Supply-Demand Imbalance: Despite improvements in new engine production capabilities, ongoing delays in aircraft production have driven up the market value of older engines, with prices for the CFM56 engine increasing by 17% since 2019, exacerbating financial pressures on airlines.
- Manufacturers' Insufficient Investment: While manufacturers like GE Aerospace claim to be increasing output and improving product quality, industry leaders express disappointment over the profitability of manufacturers, urging them to stop high pricing strategies and focus on producing more reliable engines to meet airline demands.
See More
Airline Engine Shortages Impact Industry Profits
- Engine Reliability Issues: Airline CEOs report that the new engines' reliability has not met expectations, forcing airlines into unscheduled maintenance earlier than planned, which increases operational costs and undermines the anticipated fuel savings.
- Rising Maintenance Costs: The high frequency of failures in new engines has led to significantly increased maintenance costs for airlines, which is expected to impact overall profitability, especially against the backdrop of rising fuel prices that are suppressing profit prospects.
- Strong Market Demand: Despite rising fares, travel demand remains robust, and the revenue lost from grounded aircraft adds financial pressure on the industry, particularly with an anticipated $100 billion increase in fuel expenses this year.
- Manufacturers' Insufficient Investment: Although engine manufacturers have heavily invested in expanding maintenance capabilities, production delays have kept older engine values high, leading to a shortage of engines that affects future production plans and overall industry stability.
See More
Airlines Pressure Engine Makers Amid Ongoing Issues
- Airline Challenges: During the International Air Transport Association's annual meeting, airline CEOs warned that grounded aircraft and higher repair costs could persist for years, with LATAM Brasil's CEO noting 12 single-aisle planes grounded due to engine issues, highlighting significant constraints facing the industry.
- Tight Engine Supply: Despite RTX's Pratt & Whitney and GE Aerospace ramping up investments to enhance repair and production capacity, hundreds of A320neo planes are grounded globally due to long wait times for engine inspections and repairs, indicating that supply pressures are expected to continue for at least another couple of years.
- Rising Maintenance Costs: WestJet's CEO pointed out that modern engines are generating significantly higher maintenance costs than anticipated, with many unscheduled maintenance events increasing ownership costs, thereby impacting airline profitability.
- Profit Discrepancy: IATA's CEO highlighted a disconnect between the financial performance of engine makers, which have seen double-digit margin increases, and airlines facing approximately $11 billion in additional costs due to supply chain disruptions, illustrating the disparity in interests between airlines and engine manufacturers.
See More
