The aerospace and defense industry is forecast to experience another year of strong performance in 2026 following an already remarkable 2025. Insights from Bernstein indicate that the commercial aerospace sector continues to grapple with demand surpassing supply, fostering advantageous conditions for leading manufacturers.
The persistent delivery shortfall seen with Boeing and Airbus aircraft is projected to extend beyond 2030, thereby maintaining the current supply-demand imbalance. This scenario underpins anticipated long-term increases in production volumes, revenue, and free cash flow generation among major aerospace companies.
Additionally, a trend toward extending the operational life of existing aircraft combined with relatively low replacement rates is expected to boost the lucrative engine aftermarket segment. This segment stands to benefit as airlines prioritize maintenance and refurbishment over new purchases.
Key stock selections for 2026 identified by Bernstein include:
- Boeing: As Bernstein’s premier U.S. choice, Boeing has made notable progress in addressing critical challenges within its 737 and 787 programs over the prior six months. The company’s defense division also shows signs of recovery, indicated by fewer novel charges and the recent contract acquisition for the F-47 aircraft. These advances are predicted to lead to significantly improved free cash flow in the 2027 to 2029 timeframe.
- Production rates for Boeing are expected to increase gradually, resulting in higher deliveries and enhanced cash flow. Despite a decline in share price following the third quarter 2025 earnings report—affected by delays with the 777X model and additional investment needs—Bernstein views this dip as temporary. The firm revised its price target upward to $277 from $267, highlighting Boeing’s historical tendency as a momentum-driven stock that can rebound quickly once investor confidence in its commercial expansion solidifies.
- Notable recent developments include Boeing securing an order from Ethiopian Airlines for nine 787-9 Dreamliners alongside a separate agreement to supply eleven 737 MAX jets. Similarly, UBS reiterated its Buy rating and $275 target, citing positive signs in 787 production.
- Safran: Bernstein endorses Safran as the lead European stock pick. The company is favorably positioned due to clear visibility on an extended aftermarket cycle, solid defense sector performance, and a revival in aircraft interiors operations. The aftermarket is expected to maintain strength given the scarcity of new aircraft and ongoing global air traffic expansion.
- Capacity constraints affecting the CFM56 engine series suggest that the current market cycle is likely to persist until at least the decade’s end. Moreover, the LEAP engine line is maturing and poised to contribute revenue earlier than previously anticipated, supported by two decades of fleet growth.
- Bernstein's profit projections for Safran in 2030 exceed consensus estimates by 17%, and upgrades to medium-term targets are anticipated early next year. Reflecting solid trends across all business areas, the firm increased its price target by 5% to €380.
This analysis was produced with the assistance of artificial intelligence and subjected to editorial review.