Stifel backs TAT Technologies, VSE on long-lasting aircraft repair boom

Investing.com -- Stifel initiated coverage of TAT Technologies and resumed coverage of VSE Corp with Buy ratings, saying both companies are well placed to benefit from what it called a “stronger for longer” upcycle in aircraft maintenance, repair and overhaul (MRO).

The brokerage said global air traffic continues to grow while aircraft production remains constrained, leaving the global fleet older and more maintenance intensive.

Stifel expects this to fuel steady double-digit revenue growth for companies tied to the aerospace aftermarket.

TAT Technologies, with a $44 price target, has shifted its focus to aviation MRO services and is supported by a large backlog of long-term contracts.

Elimination of legacy PE ownership overhang was positive first in investor familiarization process and eventual redomiciliation to the US to be the next natural next step, according to analyst.

Stifel sees scope for margin gains from better mix, operating leverage and acquisitions.

VSE, with a $199 price target, has transformed into a pure-play aviation parts distributor and MRO provider.

“VSEC has completed transformation to pure-play aviation aftermarket parts distributor and MRO service provider,” said analyst.

Stifel said its integrated platform is “OEM-friendly” and gives it room to expand margins and grow internationally while pursuing bolt-on acquisitions.

“We believe both TATT and VSEC can sustain double-digit organic revenue growth, expand margins, and further leverage the attractive aerospace aftermarket industry with accretive acquisitions,” analysts at Stifel said.

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