Zacks Industry Outlook HEICO, Axon and AAR

For Immediate ReleaseChicago, IL – June 24, 2026 – Today, Zacks Equity Research HEICO Corp. HEI, Axon Enterprise AXON and AAR Corp. AIR.Industry: Aerospace - DefenseLink: https://www.zacks.com/commentary/2941222/3-aerospace-defense-equipment-stocks-poised-for-aviation-growthThe Zacks Aerospace-Defense Equipment industry is benefiting from strategic acquisitions and long-term growth in global air travel, which are driving demand for aircraft parts, maintenance services, and aftermarket solutions. While global passenger traffic is expected to grow over the long term, creating opportunities for aerospace suppliers, the industry continues to face significant headwinds, including supply-chain disruptions, labor shortages, higher operating costs, and a global aircraft shortage.These constraints could weigh on near-term growth and profitability across the sector. Some key players from this industry that investors may add to their portfolio are HEICO Corp., Axon Enterprise and AAR Corp.About the IndustryThe Zacks Aerospace-Defense Equipment industry comprises firms that manufacture various vital components for the aerospace-defense space, ranging from aerostructures, space shuttles, propulsion systems, aircraft engines, defense electronics, missile and radar systems to flight test equipment, structural adhesives, instrumentation and control systems, communication products and many more.Some of these companies also offer integrated simulation and training services to the U.S. defense force. While most revenues are generated from the production of the aforementioned accompaniments, industry players also generate revenues by providing notable aftermarket support and services like maintenance, repair and overhaul activities to aerospace and defense players.3 Trends Shaping the Future of the Aerospace-Defense Equipment IndustryNew Mergers and Acquisitions (M&As) Instill Hope: Large companies have traditionally used M&As as a successful strategy to broaden their product offerings. By acquiring other businesses, they can quickly expand their capabilities and stay competitive. In April 2026, AAR completed the acquisition of Aircraft Reconfig Technologies from ZIM Aircraft Cabin Solutions. This adds the FAA Organization Designation Authorization to AAR’s Engineering Services capabilities, which will enable AAR to issue supplemental type certificates and Parts Manufacturer Approval without depending on third parties.In April 2026, TransDigm Group completed the acquisition of Jet Parts Engineering and Victor Sierra Aviation Holdings. This strengthens TransDigm's core aerospace aftermarket business by adding proprietary replacement parts and repair solutions that generate recurring, high-margin revenues. Such consolidations help provide access to a broader range of business models, while improved economies of scale across the sector should support market expansion and revenue growth.Air Traffic View Boosts Opportunities: According to a report by the International Air Transport Association (“IATA”), global air passenger demand is expected to grow 2.1% year over year in 2026. This marks a significant deceleration from the 5.3% growth recorded in 2025. The Middle East region faces a deep traffic contraction due to strictly closed airspaces, forcing massive traffic rerouting.However, according to IATA’s long-term outlook, global air passenger demand is expected to more than double by 2050, growing at a compound annual growth rate (CAGR) of 3.1% to reach 20.8 trillion Revenue Passenger Kilometers (RPKs). The report also stated that different scenarios are driven by alternative modeling of long-term economic growth, populations, aviation fuel price trends, the global energy transition, and air transport supply-side capacity development.As passenger traffic increases, airlines fly their existing fleets more frequently. This higher utilization accelerates wear and tear on aircraft, engines and components, boosting demand for replacement parts, avionics, landing systems and other equipment.Supply-Chain Disruption Poses Risks: According to IATA, airlines are facing higher operating costs because supply-chain problems have made spare parts more expensive and harder to obtain. Airport fees, air traffic charges, and aircraft ownership costs have also increased. With new aircraft in short supply, airlines are leasing older, mid-life planes at higher rates. These older aircraft also consume more fuel, further increasing overall expenses. IATA has highlighted that limited aircraft availability and labor shortages remain key supply-side challenges, while broader disruptions continue to delay the timely production and delivery of essential systems.Per IATA, ongoing disruptions to global supply chains and operational constraints linked to the Middle East conflict are adding pressure to an already tight market, reinforcing the existing aircraft shortage. Aircraft deliveries have fallen well below the level expected if the industry had continued growing at its pre-pandemic pace, creating an estimated shortage of about 5,600 aircraft.The total order backlog reached 18,100 aircraft in May 2026, equal to almost 60% of the active fleet. The reduced pace of jet deliveries and limited availability of materials for aircraft manufacturing may compel OEMs to cut production, potentially weighing on near-term earnings and cash flow across the aerospace and defense equipment industry.Zacks Industry Rank Reflects Bright OutlookThe Zacks Aerospace-Defense Equipment industry is housed within the broader Zacks Aerospace sector. It currently carries a Zacks Industry Rank #55, which places it in the top 22% of more than 247 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates robust near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.Before we present a few aerospace-defense equipment stocks that you may want to add to your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.Industry Beats Sector, Lags S&P 500The Aerospace-Defense Equipment industry has underperformed the Zacks S&P 500 composite but outperformed the sector over the past year. The stocks in this industry have collectively surged 21% over the past year, while the Aerospace sector has soared 8.5%. The Zacks S&P 500 composite has gained 28.4% in the same time frame.Industry's Current ValuationOn the basis of trailing 12-month EV/Sales, which is used for valuing capital-intensive stocks like aerospace-defense equipment, the industry is currently trading at 15.06X compared with the S&P 500’s 5.87X and the sector’s 3.33X.Over the past five years, the industry has traded as high as 15.6X, as low as 6.1X and at the median of 8.39X.3 Aerospace-Defense Equipment Stocks to BuyHEICO: Florida-based HEICO is one of the world’s leading manufacturers of FAA-approved jet engine and aircraft component replacement parts. It also manufactures various types of electronic equipment for the aviation, defense, space, medical, telecommunications and electronics industries.In June 2026, HEICO announced that its Exxelia subsidiary acquired 90% of the ownership of CalRamic Technologies, LLC. The company is expected to benefit by expanding its aerospace and defense electronics portfolio with specialized high-voltage capacitors, supporting future revenue and earnings growth.The Zacks Consensus Estimate for HEI’s fiscal 2026 sales indicates a 15.8% improvement year over year. The estimate for fiscal 2026 earnings implies 18% year-over-year growth. HEI currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Axon Enterprise: Based in Scottsdale, AZ, Axon develops and manufactures weapons for U.S. state and local governments, the U.S. federal government, international government customers and commercial enterprises. Given the rising global demand for Counter-Unmanned Aircraft Systems (“CUAS”), Axon is also expected to witness strong demand for its Dedrone platform from NATO’s airspace defense agencies.Recently, the company launched Dedrone C2, an upgraded counter-drone platform featuring improved sensor fusion for better drone detection, integrated mitigation management capabilities, and broader compatibility with third-party sensors and countermeasure systems, giving customers a flexible, end-to-end drone defense solution.The Zacks Consensus Estimate for AXON’s 2026 sales indicates a 31% improvement year over year. The estimate for 2026 earnings implies 18.1% growth year over year. AXON currently carries a Zacks Rank #1.AAR: Based in Wood Dale, IL, the company provides various products and services to the aviation and defense industries worldwide. AAR's decision to reorganize its business and wind down its Legacy Commercial Programs segment is aimed at improving profitability, cash flow, and returns on capital. The Legacy Commercial Programs business required significant investments in aircraft components and assets while generating relatively low profits, making it less attractive than AAR’s higher-margin businesses.By gradually exiting this segment over the next three to four years and focusing on areas such as parts supply, MRO services, software, and government solutions, AAR expects to simplify its business model, boost margins, free up capital for growth initiatives, and improve overall shareholder returns.The Zacks Consensus Estimate for AIR’s fiscal 2026 sales indicates a 17.7% improvement year over year. The estimate for 2026 earnings implies 27.1% growth year over year. AIR currently carries a Zacks Rank #2 (Buy).Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. 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