Rolls-Royce, BAE Systems and Babcock International are among JP Morgan's top ideas in European aerospace and defence for the fourth quarter.
Analyst David Perry sees Rolls-Royce and French rival Safran as core holdings, and expects both to remain strong performers beyond 2026.
The two engine makers have outperformed their local markets so far this year.
Melrose, the aerospace components group, has underperformed.
Across the five civil aerospace companies JP Morgan covers, excluding Senior, shares have on average tracked their local markets this year.
The broker remains positive on the engine aftermarket, the servicing and spare parts business, which has held up well despite high jet fuel prices.
Defence divide
European defence stocks have on average lagged their local markets by about 6% this year, but the spread between winners and losers is wide.
JP Morgan said investors clearly prefer companies with long order books and a wide moat, meaning products that cannot easily be replaced.
It rates BAE, Babcock and Italy's Leonardo overweight, meaning it expects them to beat the wider sector, and puts all three in that category.
By contrast, investors have sharply marked down companies whose technology they fear could be displaced, such as Germany's Rheinmetall and RENK and the Czech group CSG.
JP Morgan said the debate over technology displacement is complex and may not be settled for many years.
The onus is on those companies to prove their businesses have staying power, the broker said.
That makes investor events at Rheinmetall on 27 November and RENK on 8 December especially important.
JP Morgan has placed Rheinmetall on negative catalyst watch, flagging a potential share price fall in the near term.
It has put MTU Aero Engines and Leonardo on positive catalyst watch.
In defence, the market is now paying for products nobody can easily swap out.
