Ahead Of The Bell: Defense And Aeropsace

HARTFORD, Conn. (AP) — The aerospace industry is improving slowly as companies aren't cutting inventory as much and do needed repairs on aircraft, an analyst said Tuesday.

Analyst Howard A. Rubel said aerospace companies that attended a recent Jefferies & Co. conference reported that volume year-over-year continues to be negative, but results appear to be improving from quarter to the next.

"Some of the advance towards steady-state and growth is driven by a reduction in destocking and the inevitable maintenance cycle required for aircraft," he said in a note to investors. "Most defense businesses continue to show volume improvement, but at a slower rate."

In addition, although businesses are holding back research and development to adjust to the market, "new products that could take share or change a market are getting the funds they need to move forward," Rubel said.

Civil air traffic is declining at a slower rate, down year-over-year by about 2 percent in July from previous monthly declines of about 6 percent, he said.

Rubel continues to project another production rate cut in the fall for Boeing Co. and Airbus, though he said it is more likely that a cut of about 10 percent to 15 percent for the Boeing 737 and Airbus A320 series may not materialize.