Investing.com -- KeyBanc Capital Markets downgraded ratings on ATI Inc. and Howmet Aerospace from Overweight to Sector Weight on Thursday, citing slowing order rates and inventory accumulation within the aerospace sector.
The downgrades come as part of KeyBanc’s updated analysis following its proprietary Q3 2024 Plane Chain survey of aerospace suppliers.
“We are adjusting our expectations for aero-centric suppliers under coverage to reflect slowing order rates and the onset of inventory accumulation after nearly unabated positive momentum over the last three years,” KeyBanc said.
The firm added that ongoing uncertainty at Boeing (NYSE:BA) adds further risk to the outlook. As a result, KeyBanc has cut its near-term EPS expectations across several aerospace names.
ATI shares have increased 145% since KeyBanc’s upgrade in 2018, compared to a 52% gain in the iShares U.S. Aerospace & Defense ETF (ITA) over the same period.
Meanwhile, HWM (BMV:HWM) shares are up 262% since their upgrade in 2021, far outpacing the 55% increase in the ITA. Despite these strong performances, KeyBanc believes the current environment justifies moving both stocks to Sector Weight.
On the brighter side, KeyBanc remains optimistic about the aerospace aftermarket and the strength within the space and defense sector.
The firm maintained its Overweight ratings on TransDigm Group and Rocket Lab USA, raising the price targets on both stocks.
“We remain confident in prolonged tightness within the A&D aftermarket and strength within Space and Defense,” the bank added.
KeyBanc increased its price target on TDG to $1,500 and raised RKLB’s target to $12. According to the firm, both companies are seen as well-positioned to benefit from their respective markets.