RTX - UBS picks through hurting aerospace/defense names for opportunities

Heading into Q3 earnings season for aerospace and defense (coming next week, while airlines get an earlier start this week), the stocks logged a difficult quarter, UBS notes. Aerospace names declined 9% in Q3, and defense tickers fell 3% (punished in particular by a three-month drop of over 18% in Huntington Ingalls Industries (HII)). Meanwhile, airlines saw a bit of a rebound for Q3 (+3%) but are still the worst performers year-to-date, down 45%. Though Q3 marked a bottom for commercial aerospace, a tepid recovery likely means only modest sequential improvement for Q3 (with "destocking a wild card for some suppliers"). An aftermarket recovery will surely take place, and well before the OEM side, but there's still uncertainty on the impact of retirements, USM and overall flight activity, the firm says. For OEMs and suppliers, that destocking along with rate adjustments continued to drag on names including Boeing (BA), Spirit

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UBS picks through hurting aerospace/defense names for opportunities