NEW YORK (TheStreet) -- Which aerospace and defense stocks with the best growth rates should be in your portfolio?

Deloitte is forecasting 3% growth for the overall global aerospace and defense industry in 2015, fueled by the commercial aerospace business.

"The global commercial aerospace sector is expected to sustain its significant revenue and earnings growth in 2015, underlined by extended record-setting production levels both at the platform and in the supplier base," Deloitte wrote in its 2015 sector outlook. "This growth is likely to be driven primarily by increased production rates due to the accelerated replacement cycle of obsolete aircraft with next generation fuel-efficient aircraft, as well as the continued increases in passenger travel demand, especially in the Middle East and the Asia-Pacific region."

On the other hand, Deloitte predicts continued decline in revenue for the global defense sector, with the U.S. defense budget "a key driver of this decline, as sales revenues lag outlays, appropriations and budget authorizations, despite calls for increases in defense spending."

Still there are stocks worth considering in this sector.

All of the aerospace and defense stocks on this list are rated "Buy, B" or better ratings from TheStreet Ratings, TheStreet's proprietary ratings tool. The stocks also each had five stars for growth, meaning they have the highest growth rates for revenue and earnings in their respective sector.

TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which aerospace and defense stocks should be in your portfolio. Year-to-date returns are based on March 20, 2015 closing prices.


BA Chart BA data by YCharts

1. Boeing Co. (BA - Get Report)
Rating: Buy, A-
Market Cap: $107.9 billion
Year-to-date return: 17.2%

The Boeing Company, together with its subsidiaries, designs, develops, manufactures, sells, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide.

"We rate BOEING CO (BA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BA's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 2.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 25.46% and other important driving factors, this stock has surged by 26.07% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • BOEING CO has improved earnings per share by 25.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BOEING CO increased its bottom line by earning $7.40 versus $5.97 in the prior year. This year, the market expects an improvement in earnings ($8.45 versus $7.40).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 18.9% when compared to the same quarter one year prior, going from $1,233.00 million to $1,466.00 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Aerospace & Defense industry and the overall market, BOEING CO's return on equity significantly exceeds that of both the industry average and the S&P 500.

ATRO Chart ATRO data by YCharts

2. Astronics Corp. (ATRO - Get Report)
Rating: Buy, A-
Market Cap: $1.6 billion
Year-to-date return: 33.4%

Astronics Corporation, through its subsidiaries, designs and manufactures products for aerospace, defense, consumer electronics, and semi-conductor industries worldwide. It operates in two segments, Aerospace and Test Systems.

"We rate ASTRONICS CORP (ATRO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ATRO's very impressive revenue growth greatly exceeded the industry average of 0.4%. Since the same quarter one year prior, revenues leaped by 57.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.80, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • ASTRONICS CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ASTRONICS CORP increased its bottom line by earning $2.66 versus $1.48 in the prior year. This year, the market expects an improvement in earnings ($3.20 versus $2.66).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 188.6% when compared to the same quarter one year prior, rising from $6.39 million to $18.44 million.
  • Powered by its strong earnings growth of 138.23% and other important driving factors, this stock has surged by 44.96% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

 

 

 

HEI Chart HEI data by YCharts

3. Heico Corp. (HEI - Get Report)
Rating: Buy, A-
Market Cap: $3.5 billion
Year-to-date return: -3.6%

HEICO Corporation, through its subsidiaries, designs, manufactures, and sells aerospace, defense, and electronic related products and services in the United States and internationally.

"We rate HEICO CORP (HEI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • HEI's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 0.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The current debt-to-equity ratio, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.18, which illustrates the ability to avoid short-term cash problems.
  • HEICO CORP reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HEICO CORP increased its bottom line by earning $1.80 versus $1.52 in the prior year. This year, the market expects an improvement in earnings ($4.09 versus $1.80).
  • 39.04% is the gross profit margin for HEICO CORP which we consider to be strong. HEI has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, HEI's net profit margin of 10.30% compares favorably to the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 0.7% when compared to the same quarter one year prior, going from $27.46 million to $27.64 million.

 

HXL Chart HXL data by YCharts

4. Hexcel Corp. (HXL - Get Report)
Rating: Buy, A
Market Cap: $4.6 billion
Year-to-date return: 19.6%

Hexcel Corporation, together with its subsidiaries, develops, manufactures, and markets structural materials for use in commercial aerospace, space and defense, and industrial markets in the United States and internationally.

"We rate HEXCEL CORP (HXL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 0.4%. Since the same quarter one year prior, revenues rose by 10.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HEXCEL CORP has improved earnings per share by 17.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HEXCEL CORP increased its bottom line by earning $2.12 versus $1.85 in the prior year. This year, the market expects an improvement in earnings ($2.36 versus $2.12).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 12.3% when compared to the same quarter one year prior, going from $47.10 million to $52.90 million.
  • Net operating cash flow has significantly increased by 63.89% to $126.20 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.71%.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

 

TDY Chart TDY data by YCharts

5. Teledyne Technologies Inc. (TDY - Get Report)
Rating: Buy, A
Market Cap: $3.5 billion
Year-to-date return: 0.11%

Teledyne Technologies Incorporated provides instrumentation, digital imaging products and software, aerospace and defense electronics, and engineered systems in the United States, Canada, the United Kingdom, and internationally.

"We rate TELEDYNE TECHNOLOGIES INC (TDY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, notable return on equity and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TDY's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 4.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Aerospace & Defense industry and the overall market on the basis of return on equity, TELEDYNE TECHNOLOGIES INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • 37.07% is the gross profit margin for TELEDYNE TECHNOLOGIES INC which we consider to be strong. Regardless of TDY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TDY's net profit margin of 9.67% compares favorably to the industry average.

 

 

CW Chart CW data by YCharts

6. Curtiss-Wright Corp. (CW - Get Report)
Rating: Buy, A+
Market Cap: $3.5 billion
Year-to-date return: 1.1%

Curtiss-Wright Corporation provides engineered products and services to the defense, power generation, oil and gas, commercial aerospace, and general industrial markets worldwide. It operates through three segments: Flow Control, Controls, and Surface Technologies.

"We rate CURTISS-WRIGHT CORP (CW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, growth in earnings per share, solid stock price performance and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is somewhat low, currently at 0.65, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, CW has a quick ratio of 1.65, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 72.65% to $178.59 million when compared to the same quarter last year. In addition, CURTISS-WRIGHT CORP has also vastly surpassed the industry average cash flow growth rate of 20.71%.
  • CURTISS-WRIGHT CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CURTISS-WRIGHT CORP increased its bottom line by earning $3.46 versus $2.90 in the prior year. This year, the market expects an improvement in earnings ($3.90 versus $3.46).
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • CW, with its decline in revenue, slightly underperformed the industry average of 0.4%. Since the same quarter one year prior, revenues slightly dropped by 2.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

 

 

Huntington Ingalls Industries, Inc. engages in designing, building, overhauling, and repairing ships primarily for the U.S. Navy and the U.S. Coast Guard. It operates in three segments: Ingalls Shipbuilding, Newport News Shipbuilding, and Other.

"We rate HUNTINGTON INGALLS IND INC (HII) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, HII's share price has jumped by 39.83%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HII should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $402.00 million or 37.67% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.78%.
  • HUNTINGTON INGALLS IND INC's earnings per share declined by 42.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HUNTINGTON INGALLS IND INC increased its bottom line by earning $6.86 versus $5.17 in the prior year. This year, the market expects an improvement in earnings ($8.96 versus $6.86).
  • Even though the current debt-to-equity ratio is 1.25, it is still below the industry average, suggesting that this level of debt is acceptable within the Aerospace & Defense industry. Despite the fact that HII's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.55 is high and demonstrates strong liquidity.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the Aerospace & Defense industry and the overall market on the basis of return on equity, HUNTINGTON INGALLS IND INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.

 

 

HON Chart HON data by YCharts

8. Honeywell International Inc. (HON - Get Report)
Rating: Buy, A+
Market Cap: $80.4 billion
Year-to-date return: 4.7%

Honeywell International Inc. operates as a diversified technology and manufacturing company worldwide.

"We rate HONEYWELL INTERNATIONAL INC (HON) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, notable return on equity and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
  • HONEYWELL INTERNATIONAL INC reported flat earnings per share in the most recent quarter. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HONEYWELL INTERNATIONAL INC increased its bottom line by earning $5.33 versus $4.92 in the prior year. This year, the market expects an improvement in earnings ($6.10 versus $5.33).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Aerospace & Defense industry and the overall market on the basis of return on equity, HONEYWELL INTERNATIONAL INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Net operating cash flow has slightly increased to $1,762.00 million or 5.63% when compared to the same quarter last year. Despite an increase in cash flow, HONEYWELL INTERNATIONAL INC's cash flow growth rate is still lower than the industry average growth rate of 20.78%.

 

TXT Chart TXT data by YCharts

9. Textron (TXT - Get Report)
Rating: Buy, A+
Market Cap: $12.3 billion
Year-to-date return: 5.4%

Textron Inc. operates in the aircraft, defense, industrial, and finance businesses worldwide. It operates through five segments: Textron Aviation, Bell, Textron Systems, Industrial, and Finance.

"We rate TEXTRON INC (TXT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 0.4%. Since the same quarter one year prior, revenues rose by 16.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.91, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • TEXTRON INC has improved earnings per share by 26.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TEXTRON INC increased its bottom line by earning $2.15 versus $1.75 in the prior year. This year, the market expects an improvement in earnings ($2.50 versus $2.15).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 26.9% when compared to the same quarter one year prior, rising from $167.00 million to $212.00 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.