Major Airlines Likely to Complain over Rockwell Collins/United Technologies Merger

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Thematic (Sector/Industry)

Philippines Industrials / Thematic (Sector/Industry)

Shanghai Electric Group Company (601727 CH)

This year marks the start of an unprecedented production increase in narrow-body passenger aircraft, a category that we believe is the major profit driver within a robust commercial aerospace upcycle. Although investor sentiment reflects ever-deepening worries over an ineluctable aerospace downturn, we posit that demand will remain solid, and we’ve highlighted three aerospace firms trading at attractive valuations: <a href="https://www.smartkarma.com/entities/21380" target="_blank" data-smartkarma-citation="entities:21380:1">Airbus Group SE (AIR FP)</a>, <a href="https://www.smartkarma.com/entities/12750" target="_blank" data-smartkarma-citation="entities:12750:1">United Technologies Corp (UTX US)</a>, and <a href="https://www.smartkarma.com/entities/21540" target="_blank" data-smartkarma-citation="entities:21540:1">Safran SA (SAF FP)</a>. Strong economic moats afford each of these firms defensible positions in a product cycle bolstered by growing global travel demand that we expect to span the next two decades. Among our three picks, Safran is the only true pure play on the narrow-body market.We believe Airbus and Boeing will capture more than 90% of the narrow-body market through 2035 thanks to the A320neo and B737 MAX aircraft combined with economic moats built on switching costs and intangible assets. However, Boeing's lagging order book indicates to us that the neo enjoys an advantage over the MAX. We think Airbus Group investors will come off the sidelines and consensus will grow increasingly positive as the A320neo production ramp-up adds roughly EUR 2.5 billion of profit contribution from 2016 to 2020 and as capital outlays on other programs taper off.  We believe that United Technologies' and Safran's share prices fail to fully reflect the profitability potential of the engine aftermarket because of a consensus built around near-term earnings combined with an underappreciation of the new economics emerging around rate per flight hour services agreements.Analysts: Chris Higgins, Barbara Noverini, &amp; Jeffrey Vonk, CEFA

This year marks the start of an unprecedented production increase in narrow-body passenger aircraft, a category that we believe is the major profit driver within a robust commercial aerospace upcycle. Although investor sentiment reflects ever-deepening worries over an ineluctable aerospace downturn, we posit that demand will remain solid, and we’ve highlighted three aerospace firms trading at attractive valuations: Airbus Group SE (AIR FP), United Technologies Corp (UTX US), and Safran SA (SAF FP). Strong economic moats afford each of these firms defensible positions in a product cycle bolstered by growing global travel demand that we expect to span the next two decades. Among our three picks, Safran is the only true pure play on the narrow-body market.We believe Airbus and Boeing will capture more than 90% of the narrow-body market through 2035 thanks to the A320neo and B737 MAX aircraft combined with economic moats built on switching costs and intangible assets. However, Boeing's lagging order book indicates to us that the neo enjoys an advantage over the MAX. We think Airbus Group investors will come off the sidelines and consensus will grow increasingly positive as the A320neo production ramp-up adds roughly EUR 2.5 billion of profit contribution from 2016 to 2020 and as capital outlays on other programs taper off.  We believe that United Technologies' and Safran's share prices fail to fully reflect the profitability potential of the engine aftermarket because of a consensus built around near-term earnings combined with an underappreciation of the new economics emerging around rate per flight hour services agreements.Analysts: Chris Higgins, Barbara Noverini, &amp; Jeffrey Vonk, CEFA 

China Railway Construction Corp (1186 HK)

China Communications Construction (1800 HK)

Shanghai Electric Group Company (2727 HK)

Metallurgical Corporation of China Ltd (1618 HK)

Shanghai International Port Group (600018 CH)

International Consolidated Airlines Group (IAG LN)

International Consolidated Airlines Group

Narrow Bodies Equal Fat Profits: How Investors Can Capitalize on the Aerospace Boom