With the S&P 500 down almost 20% in 2022, it’s difficult to locate companies that are in the black for the year. Having said that, even in this market, there are areas of strength. Baker Hughes stock (NASDAQ:BKR), aviation services provider AAR (NASDAQ:AIR), and advanced composites producer Hexcel (NASDAQ:HXL) are all up this year. Let’s take a look at why and if they’re still smart buys from here.
Baker Stock: Baker Hughes is Capable of Catching Up.
Even though Baker Hughes stock (NASDAQ:BKR) is up 3% this year, it has outperformed its main counterparts, Schlumberger and Halliburton. The robust earnings delivered by oil services and equipment businesses are all due to the persistently high price of oil – benchmark West Texas Intermediate crude remains over $83 per barrel despite widespread predictions of a recession.
Baker Hughes shares’ underperformance might be attributed to a pair of disappointing earnings reports, which were marked by costs connected to its activity in Russia and supply chain challenges in sourcing components. However, such problems should not reoccur, and management has already begun a reorganization plan that will save $150 million each year. As a result, it has the potential to catch up to its counterparts’ margins.
AAR Stock: AAR is Experiencing a Commercial Aviation Revival.
AAR also operates in profitable end markets. While the aviation sector has always been recognized as very cyclical, and rightfully so, this cycle is a little different. Because of the one-of-a-kind nature of an intentionally produced downturn in the industry (caused by the pandemic’s lockdowns and social distancing attempts), the commercial aerospace sector’s weakness in 2020 and 2021 did not correspond with its regular economic position.
We still have a long way to go before commercial airline departures return to pre-crisis levels. As a result, even if the overall economy slows, flight departures – and demand for AAR’s stock (NASDAQ:AIR) aviation services and airline operational support – may continue to rise.
AAR has also had to work hard to compensate for the loss of employment caused by the United States military’s withdrawal from Afghanistan. Nonetheless, sales to commercial clients increased 10% in the first quarter of fiscal 2023 (which ended Aug. 31), and Wall Street analysts forecast mid-single-digit percentage growth over the following four years.
Hexcel Stock: Increased Airplane Manufacturing Will Help Hexcel.
Hexcel, a developer of advanced composites, has had a solid year as investors have warmed to the continuing recovery in the commercial aircraft industry. Hexcel’s composites outperform conventional metals in terms of weight and strength, and they are increasingly being employed in contemporary aircraft. As a result, when aircraft manufacturers like Airbus and Boeing can scale up production again (which both are vigorously doing), Hexcel’s bottom line should improve.
Furthermore, since newer model planes include higher percentages of Hexcel’s composites, its aerospace-focused sales might still expand considerably even if (for example) the same number of airplanes are manufactured in 2024 as in 2019. Hexcel stock (NASDAQ:HXL) has a lengthy growth path ahead of it, given the resurgence in airline profitability and the backlogs at Boeing and Airbus.
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