The aerospace industry faces risks to its already vulnerable and complex supply chains amid US tariff increases, Morgan Stanley said in a Friday research note.
Analysts said they prefer aftermarket names over OE as pricing power and pass-through clauses remain the top "mitigants" to tariffs.
Although demand destruction in the aerospace industry will be relatively less disruptive than Covid, risks of similar supply chain issues will likely arise.
The aerospace sector is undersupplied, and airlines might further delay taking aircraft delivery due to tariffs, the brokerage said.
Signs of weakness in both domestic and international air traffic emerge amid a volatile macro backdrop stemming from dynamic US trade policies, according to the analysts.
Morgan Stanley said that Transidgm (TDG) and RBC Bearings (RBC) have robust pricing power and can dynamically adjust pricing. Analysts said they downgraded Joby Aviation (JOBY) to equal weight from overweight.
The brokerage lowered its price target for Joby Aviation to $7 from $10. The analysts also reduced price targets for AerCap Holdings (AER) to $101; CAE (CAE) to 36 Canadian dollars ($25.86); Hexcel (HXL) to $50; Textron (TXT) to $71, and FTAI Aviation (FTAI) to $138.
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