Aerospace stocks have taken a hit lately, and Wall Street is paying close attention. A spike in oil prices rattled the sector, dragging down a group of aftermarket aerospace companies by roughly 15% on average. By comparison, the S&P 500 Index ($SPX) is down 6% from its all-time high.
For investors, the question is simple: Is this a buying opportunity or the start of something worse?
Morgan Stanley has a clear answer.
Why Aerospace Stocks Sold Off Hard
According to a report from Seeking Alpha:
- The selloff was triggered by rising geopolitical tensions that pushed fuel costs higher and raised fresh concerns about airline profitability.
- When fuel gets expensive, airlines feel the squeeze, and investors tend to sell anything tied to aviation maintenance and services.
- But Morgan Stanley analyst Kristine Liwag pushed back on that logic in a March 24 report. She argued the drop reflects short-term uncertainty, not a collapse in underlying demand.
- The firm kept its attractive industry view and maintained “Overweight” ratings on both GE Aerospace (GE) and TransDigm Group (TDG).
The core argument: aircraft don't stop needing service just because oil prices go up.
How Did the Aerospace Stocks Perform in Q4
Both companies recently reported strong quarters, supporting Morgan Stanley's bullish case.
GE Aerospace closed out fiscal 2025 with full-year revenue up 21% year-over-year (YoY) and operating profit growing by $1.8 billion. Free cash flow hit $7.7 billion, up 24%. Orders surged 35%, and the company ended the year with a backlog of roughly $190 billion, up nearly $20 billion in just 12 months.
For 2026, GE Aerospace Chairman and CEO Larry Culp guided for earnings per share of $7.10 to $7.40, up nearly 15% at the midpoint, and free cash flow of $8 billion to $8.4 billion. The company services an installed base of 80,000 engines.
"We're well positioned to deliver for our customers and shareholders," Culp said on the call.
TransDigm also started fiscal 2026 on a strong note. First-quarter EBITDA as defined margins came in at 52.4%, ahead of internal expectations, and the company raised its full-year revenue guidance midpoint to $9.94 billion, up roughly 13% over the prior year. Operating cash flow for the quarter topped $830 million.
CEO Mike Lisman acknowledged some softness in business jet aftermarket activity but said commercial transport aftermarket growth was solid, and defense bookings came in well above expectations.
The Investment Thesis for TDG and GE
Here's the thing about airline maintenance: it can be delayed, but never skipped entirely.
Commercial aircraft typically have service lives of around 25 years. Engine work, inspections, and parts replacement have to happen eventually, regardless of where fuel prices are sitting in any given quarter. Morgan Stanley pointed out that high utilization rates and a shortage of new aircraft mean airlines are leaning more heavily on their existing fleets rather than replacing them.
That's good news for companies like GE Aerospace and TransDigm, which both generate a significant portion of their revenue from aftermarket services. GE Aerospace's commercial engine services revenue was up 26% in 2025 alone, while TransDigm generates about 90% of its net sales from proprietary products, most of which carry aftermarket exposure.
Moreover, newer engine platforms are experiencing durability challenges that are adding to servicing demand: another tailwind that neither a geopolitical flare-up nor a temporary fuel spike is going to erase.
Should You Buy GE Aerospace and TransDigm Now?
Out of the 22 analysts covering TDG stock, 14 recommend “Strong Buy,” and eight recommend “Hold.” The average TDG stock price target is $1,594.79, above the current price of about $1,163.
Out of the 20 analysts covering GE stock, 16 recommend “Strong Buy,” two recommend “Moderate Buy,” one recommends “Hold,” and one recommends “Strong Sell.” The average GE stock price target is $360.74, above the current price of about $291.
The setup is worth taking seriously. Two well-run companies with record backlogs and strong cash generation are trading lower due to macro fears that don't threaten long-term demand.
Liwag wrote that any deferred maintenance due to short-term airline margin pressure would likely result in catch-up activity later, keeping the multi-year aftermarket growth cycle intact.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
- EchoStar Stock Just Broke Above Its 50-Day Moving Average on SpaceX IPO Hype. Does That Make SATS a Buy?
- Micron Broke Below Its 50-Day Moving Average. Should You Buy the Dip?
- As the Oil Shock Sends Energy Stocks Soaring, Buy These 3 Now
- Warning: Investing in Tech Stocks May Just Be 1 Big, Overcrowded Trade
