| Show as 1 IP t COMMERCIAL AEROSPACE Nt Paced by the waited long revival In ir demand f t commercial jet aircraft the aerospace Industry seems assured of turning in an outstanding performance performance per per- for 1978 and 1979 With over overall overall all backlogs at historically high levels aerospace shipments are expected to tc reach a new record of 37 billion this year compared with billion in 1977 All of the individual sectors of the aerospace military industry private aircraft general aviation and space- space will undoubtedly participate in the strong In the opinion of the Research Department of Babson's Reports however the commercial and general aviation segments will be the prime beneficiaries The latter has been experiencing a powerful upswing in sales and earnings over the past five years and shows no sign of any letdown in the early future While these two groups just mentioned along with the space sector are the smallest in terms of business volume they are nonetheless the most profitable Investors have been steadily more aware of the potential of the companies involved with aerospace and since the beginning of 1978 have been making more market commitments In the stock market rally that has recently developed the prices of aerospace securities have rebounded even more dramatically In spite of the scope of this upswing we do nevertheless believe that opportunities for reinvestment reinvestment reinvestment rein rein- vestment will emerge in term near-term pullbacks jn in n prices Commercial and Private Jet Orders Surge Last year a cyclical downturn in commercial jet shipments that had been going on for three years finished bottoming out Industry experts are arenow arenow arenow now forecasting a strong through 1982 because of the approaching approaching approaching ap ap- ap- ap need of the airlines to replace their fleets which wt ch are rather far along in terms of age Moreover new capacity additions are a must as the result of a substantial increase in or or- ders Sales of commercial jets should advance materially in 1978 versus the billion 35 low of last year By the time we reach 1982 sales of jets are expected expected expected ex ex- ex- ex to top the billion 6 mark In addition to burgeoning demand for commercial jetliners revenues for private aircraft should soar to 17 billion for 1978 and should exceed 2 billion by 1980 Although small compared compared compared com com- pared with the commercial jet market total sales of private planes will move ahead head in the present year to about one- one third those of commercial jets up from only one one eighth eighth in 1971 Military Fighters and Weaponry The military sector is by far the largest in the whole aerospace industry industry industry in in- and spending will remain in extremely t high gh levels for the next few years even though the tempo of growth is likely to be slowed somewhat In spite of a minimal rise in m outlays for defense fiscal 1978 will be around billion and fiscal 1979 1971 approximately billion there will be substantial funding for all conventional tactical hardware Orders for both military aircraft and missiles should remain on ona ona ona a high plateau during these years even if a SALT agreement should materialize Although foreign selling will level off some this year and next owing to the restriction of export sales there will still be a number of exceptions especially involving the NATO countries coun coun- tries Furthermore it is interesting to note that overall profits on foreign sales are generally more sizable than those on domestic sales Recommendations At present the Research Department of Ba Babson's ons on's is advising a strong hold position on the stocks of the major aerospace com companies panics except Lockheed for which wt ch our selling recommendation is still in force In the event of market weakness however we favor for buying consideration Boeing Lear Sie er Raytheon and Thiokol |
