JP Morgan is urging investors not to be spooked by the recent wobble in Europe’s aerospace and defence shares, arguing that the fundamentals remain firmly in place and that both civil aviation and defence companies can deliver 15–20% earnings growth a year for the next five years.
After several years of outperformance, the sectors have slipped in recent months as money rotated elsewhere. Civil aerospace has eased back modestly, while defence names have suffered a sharper correction.
JP Morgan, however, views the sell-off as an entry point rather than the start of a broader reversal.
For UK investors, the notable inclusion is Babcock International PLC (LSE:BAB), which the bank places on its Positive Catalyst Watch.
The engineering group has been steadily rebuilding its balance sheet and order book, and JP Morgan sees scope for further upside as contract visibility improves.
Rolls-Royce Holdings PLC (LSE:RR.) also stays on the broker’s Positive Catalyst Watch list, reflecting continuing confidence in its recovery as wide-body flying hours normalise and the civil engine aftermarket strengthens.
Alongside Babcock and Rolls-Royce, MTU and Leonardo complete the group of four names singled out for upcoming catalysts. Overall, the bank’s message is that short-term sector volatility has obscured a still-robust long-term earnings profile.