4. Rockwell Collins (COL) - [Displays, communications/ surveillance systems, pilot control system] With an $12 Billion market cap, Rockwell Collins is much smaller than Honeywell, so, relatively, the avionics it’s supplying for the 787 should provide more revenue impact. Avionics is pushing the future of flight, part of the “smart” revolution where the chips and circuits monitor and control all aspects of the flight. This is definitely one of the greatest value added to today’s aircraft and provide the most flexibility for upgrades. This is similar to how you get a lot of software upgrades on your computer before you have to buy a new computer. Rockwell Collins does provide avionics for all types of aircraft, so as with Honeywell, the impact may be limited. Rockwell Collins is still buy with avionics being cornerstone for aerospace development going forward.
5. Parker-Hannifin (PH) - [Hydraulic subsystem] At a market cap of $11.5 Billion, providing a couple of hydraulic subsystems for the 787 probably won’t significantly boost Parker-Hannifin’s bottom line. However, with both manufacturing and construction going strong across the globe, there is definitely a shortage of hydraulic and other power systems to move and lift things. Parker-Hannifin’s still a good buy on global growth, but no so much on the 787 alone.
7. Spirit Aerosystems (SPR) - [Fixed and movable leading edges, flight deck, part of forward fuselage, engine pylons] For a small-cap with a $5.3 Billion market cap, Spirit Aerosystems secured quite a few parts of the Dreamliner. The fixed and movable leading edges as well as the engine pylons probably have the hardest technical specifications to achieve. I’d be worried about Spirit’s manufacturing capabilities for such specific parts, especially when 787 production hits full stride. If Spirit pulls succeeds, this company might see the greatest upside of all the 787 partners/suppliers listed here.
8. Moog Inc. (MOG.A) - [Flight control actuators] With a market cap of just under $2 Billion, Moog should be a decent beneficiary of the 787. Moog will be providing a just one type of component whose technology has been around for a long time, so this should limit it’s development and production risk. Moog has been trading mostly in step with Boeing’s stock with a flavor of small-cap volatility, so don’t see much reason for owning Moog when you can own Boeing.
9. Kaiser Aluminum (KALU) - On the July 9th episode of Fast Money, Karen Finerman of Metropolitan Capital Advisors mentioned her firm owns Kaiser Aluminum (KALU), a supplier of precision aluminum for both Boeing and Airbus. I am uncertain how much aluminum Kaiser Aluminum supplies for the 787 since the 787 uses only 20% aluminum compared to 50% in the 777 planes.
10. Dassault Systèmes (OTC:DASTY) - [Global collaboration tools/software] Dassault Systemes is slowly changing all aspects of Computer Assisted engineering design for all industrial engineering disciplines from mechanical to chemical and civil. I am unsure exactly how Dassault is involved with the 787, but most likely Boeing and it’s partners pay Dassault for the software licenses. It’s computer modeling software such as Solidworks and Simulia are lightyears ahead of any modeling software I’ve ever used. They allow engineers to simulate just about anything that can happen in the real world. Companies can design and test in virtual worlds to save costs on test facilities while achieving more sophisticated products. The main headwind is a demographic one, where older engineers were trained and still use out-of-date design software. With a good majority of senior engineers retiring soon, the generation of new engineers should be a positive for Dassault’s software. Just take heart this transition will be slow, but Dassault will be a good long term grower.
Remember, aerospace is still in super-bull mode. It’s not just about the 787 but order for the smaller 700-series planes are flying off the shelves too. The world needs to replace it’s aging airplanes AND growth countries like China will need complete fleets of their own. Meanwhile, geopolitical tensions are just as high as they’ve ever been, so countries around the world are beefing up their defenses. All the names mentioned here should continue rocking for quite a while.