Surge in Oil Prices Pressures Aerospace Aftermarket Stocks
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 6 days ago
0mins
Source: seekingalpha
- Market Performance Decline: Morgan Stanley reports a median decline of about 15% in aerospace aftermarket stocks, compared to a roughly 4% drop in the broader market, reflecting the pressure on airline profitability due to rising oil prices.
- Stable Demand: Although maintenance activities may be delayed in the short term due to high fuel prices, Morgan Stanley analysts emphasize that the 25-year service life of aircraft ensures ongoing maintenance demand, indicating robust industry fundamentals.
- Supply Constraints Drive Growth: The constrained production of new aircraft increases the maintenance intensity of existing fleets, while durability issues with newer engine platforms further elevate servicing demand, which is expected to sustain growth in the aerospace aftermarket.
- Oil Price Impact on Industry Performance: Morgan Stanley notes that the duration of elevated oil prices will directly affect industry performance, with short-lived spikes likely causing only minor deferrals in maintenance, while prolonged high prices could accelerate fleet replacement trends.
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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: 282.810
Low
275.00
Averages
345.67
High
386.00
Current: 282.810
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. The Company has an installed base of approximately 45,000 commercial and 25,000 military aircraft engines. The Company operates through two segments: Commercial Engines & Services and Defense & Propulsion Technologies. The 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 (MRO) of engines and the sale of spare parts and offers services under a variety of arrangements. The Defense & Propulsion Technologies segment provides defense engines and critical aircraft systems and consists of its 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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- Industry Profit Estimates: There has been a general reduction in profit estimates across the airline industry, yet Delta's stock remains relatively stable.
- Unusual Market Behavior: The current performance of Delta's stock is noted as unusual for the airline industry, which is typically more volatile.
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- Jet Fuel Price Impact: The airline is facing a significant 62% increase in jet fuel prices since February, which typically affects profitability.
- Industry Profit Estimates: There has been a general reduction in profit estimates across the airline industry, yet Delta's stock remains relatively stable.
- Unusual Market Behavior: The current performance of Delta's stock is noted as unusual for the airline industry, which often experiences more volatility.
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