Don't Buy SpaceX Until You Consider These 2 Aerospace and Defense Stocks With 10% EPS Growth

Howmet Aerospace and TransDigm are highlighted for strong EPS growth, with Howmet's EPS up more than 540% over five years and TransDigm's up more than 270%. Howmet reported Q1 revenue of $2.3B (+19%) and EPS of $1.44 (+71%), while TransDigm posted Q2 revenue of $2.54B (+18.3%) and EPS of $9.20 (+11.6%); both are also benefiting from high-margin aftermarket demand and aggressive bolt-on acquisitions. TransDigm raised its fiscal 2026 revenue midpoint by $420M to $10.3B-$10.42B, and both companies are returning capital via buybacks.

Analysis

HWM and TDG are both benefiting from the same macro bottleneck, but the setup is not symmetric. The real second-order winner is the supplier base attached to aging fleets and OEM delivery slippage: every month of delayed new aircraft production extends the maintenance tail, shifting value from low-margin build cycles into higher-margin spares, consumables, and sole-source components. That creates a structurally better demand mix, but it also means the trade is more dependent on airline utilization staying high than on headline aircraft deliveries.

HWM’s more interesting angle is that it is becoming a levered beneficiary of power-infrastructure capex tied to AI buildouts, which diversifies it away from pure aero cyclicality. If gas turbine demand doubles over 3-5 years as management expects, the market may continue to underwrite a higher quality growth multiple because this segment is not exposed to the same OEM timing risk as aerospace. The M&A add-ons matter less for near-term revenue than for margin mix and customer lock-in; that should support a longer beat-and-raise run, especially if integration remains clean.

TDG remains the cleaner pricing-power story, but the market may be understating the duration risk embedded in those margins. The more airlines defer fleet refreshes, the more aftermarket leverage TDG gets today, yet that also compresses the eventual replacement cycle and raises the chance of a 12-24 month air-pocket once OEM output normalizes. In other words, TDG’s margin durability is high, but not infinite; the stock will likely trade on whether investors believe the aftermarket supercycle is structural or just delayed demand pulled forward.

The contrarian view is that both names are crowded quality growth trades and may be partially self-financing through buybacks and M&A optics rather than purely organic acceleration. If growth normalizes even modestly, multiple compression could outrun earnings growth because the market is already paying up for perceived scarcity value in high-margin industrials. The better risk/reward may be relative value within aerospace rather than outright beta: favor the business with a second growth leg and cleaner integration optionality over the one with the most mature aftermarket base.

Key Decisions for Investors

• Long HWM vs short a diversified industrial basket over 3-6 months: HWM has the cleaner mix-shift story with a second growth engine from gas turbines, while the short leg hedges multiple compression in cyclicals.
• Add TDG on pullbacks, but size as a 6-12 month compounder rather than a breakout trade; the core thesis is pricing power plus buybacks, with the main risk being aftermarket normalization if OEM supply improves faster than expected.
• Use a call spread on HWM for the next 6-9 months to express upside from gas-turbine and M&A integration without paying full multiple for a quality industrial name already rerating.
• Pair long HWM / short TDG if you want exposure to aerospace demand without overpaying for the most mature aftermarket franchise; this captures the incremental benefit of non-aero diversification and reduces timing risk around fleet refresh normalization.
• Trim both names if backlog commentary shifts from 'deferred but intact' to 'recovering' in OEM supply chains; that would be the earliest sign the aftermarket supercycle is peaking and the market will discount forward margin inflection.