Aerospace shares have posted solid gains so far this year, but a recent report from Bernstein suggests that while the sector’s fundamentals remain strong, the rate of earnings upgrades may decelerate.
The research firm highlighted the aftermarket segment as a major contributor to 2025 performance, noting that second-quarter sales growth averaged over 20%. Demand for spare parts and maintenance remains robust as airlines work to extend the operational life of existing fleets amid limited deliveries of new aircraft.
“There are no signs of slowing traffic or weakening airline profitability,” Bernstein said, emphasizing that both indicators are critical for sustaining the aftermarket business.
With Boeing (NYSE:BA) still recovering from its 737 crisis and Airbus gradually ramping up production, the shortage of new planes is likely to continue, further boosting aftermarket demand.
Companies like Safran (EU:SSSAP), Rolls-Royce (USOTC:RYCEY), and MTU Aero Engines (BIT:1MTX) have all benefited, though their outlooks differ. Safran saw strong first-half results driven by its propulsion segment, and Bernstein expects another beat, forecasting its 2025 EBIT 6% above consensus. Analysts cautioned, however, that high valuations may temper any immediate upside until the company updates its medium-term targets later this year or in early 2026.
Rolls-Royce has continued to outperform following a major turnaround. Its civil aerospace and power systems divisions posted profit growth exceeding 50% in the first half, leading the company to raise its 2025 guidance. Bernstein expects further upgrades to medium-term targets in 2026 but noted that the stock trades at a 25% premium to Safran, which analysts described as “hard to justify.”
MTU has lagged behind peers due to issues with Pratt & Whitney’s geared turbofan engine, which led to the grounding of over 600 aircraft and hundreds of millions of euros in compensation. While the groundings have stabilized and are projected to decline in 2026, Bernstein noted that investor caution remains elevated. The brokerage maintains an “outperform” rating on MTU, anticipating a re-rating once technical issues subside.
Bernstein also highlighted that the strong aftermarket trend is already widely recognized and largely priced in. Most companies in the sector have already raised their 2025 targets, meaning that while earnings revisions will continue, they are likely to do so at a slower pace.
Looking beyond 2025, analysts warned that growth could be limited by challenging year-on-year comparisons and the potential reversal of temporary tailwinds, such as the high inventory of spare engines in the market.
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