According to a research note released by Bank of America on Thursday, despite growth potential from domestic and foreign clients, investors are generally responding favorably to a slow Q2 quarter for aerospace and defense equities.
The bank predicted that businesses would continue to be plagued by labor market restrictions that reduce productivity. As U.S. unemployment levels return to pre-pandemic levels, workers are becoming more difficult to find. According to management at numerous organizations, these restrictions should loosen up in the upcoming quarters, according to Bank of America.
Investor Resilience Toward Aerospace and Defense Stocks
Investor confidence was also evident as businesses released their June quarter results. Only 17 out of the 36 stocks the bank covers ended lower on the day they released their earnings, and only 10 were down a week later, according to Bank of America.
According to Bank of America, Northrop Grumman (NYSE:NOC), Embraer (ERJ), Bombardier (TSE:BBD.B), and L3Harris (NYSE:LHX) stood out for managing supply-chain issues that hindered many businesses from acquiring parts needed for manufacturing.
In the meantime, according to BofA, businesses with ties to the commercial aviation sector have benefited from a pickup in demand from airlines that are recovering from the pandemic’s detrimental effects on travel.
The bank went on to say that the industry will benefit from Boeing’s (NYSE:BA) decision to resume 787 Dreamliner deliveries after a 15-month delay due to production flaws.
According to Bank of America, the most frequent explanations given by aerospace and defense industries for their underwhelming performance during the June quarter included supply-chain problems, labor shortages, inflation, the cost of materials, and expenditure delays.
The iShares U.S. Aerospace & Defense ETF (ITA) has a Hold recommendation from Seeking Alpha contributor Valkyrie Trading Society due to supply-chain issues in the sector.
Featured Image: Megapixl @Selagin
Author Jowi Kwasu 
