Is There Money In Aircraft And Aerospace?

by David Jenyns on November 10, 2008

Defense will always have a future in American investments, but is there any money to be made in aircraft and aerospace investments? A sharp earnings rebound seems in prospect for plane manufacturers.

Meanwhile, Grumman’s work in the missile and space fields is increasing. Like Grumman, most aircraft companies are rapidly stepping into aerospace, of course, with different speed and emphasis.

Because of the usual uncertainties of military contracts, defense stocks have traditionally been accorded low price-earnings multiples. For instance, even with its business completely in the new military and space sciences, Martin is still selling for only 12 times earnings, compared with 30, 40, 50 or even more times earnings given stocks of some of the small science and electronics firms which are doing only subcontract work on
military projects.

Most of the new glamour industries are tied directly or indirectly to defense.

Good examples of old-line aircraft companies doing super-glamorous work are McDonnell Aircraft’s Mercury man-in-space project and Republic Aviation’s new high-powered gun-welding process which may speed fabrication of space vehicles.

For every dollar spent by the government, 56 cents goes for defense items; so the future for defense is relatively secure.

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