Aerospace doesn't look like a great place for investors right now, given the virtual shutdown of most airline travel. But obviously there are parts of the industry that will survive -- and even thrive -- in the long term.
When we think beyond the COVID-19 pandemic, Virgin Galactic Holdings (NYSE:SPCE), Heico Corp (NYSE:HEI), and Lockheed Martin Corporation (NYSE:LMT) have what it takes to survive this economic slump and come out healthier than ever on the other side.
Upending air travel as we know it
One aerospace company whose revenue hasn't been affected by the COVID-19 pandemic is Virgin Galactic -- and that's only because it had very little revenue to begin with. In 2019, the company had just $3.8 million in revenue as it invested in building and testing its spacecraft.
Virgin Galactic isn't being affected in the short term, and I don't think the company's long-term prospects have changed since COVID-19 began to spread. The company is still targeting commercial travel for multimillionaires and has received 7,957 reservations of interest as of Feb. 23, 2020.
What's appealing about Virgin Galactic is that its goal is to disrupt travel as we know it. A two-hour flight from Los Angeles to Tokyo, or a one-hour flight from New York to London are both possible with the company's spacecraft flying at Mach 5. Right now, given their $250,000 price tags, those tickets are affordable exclusively for the ultra-wealthy, but if ticket prices become affordable enough for (mere) millionaires, the business could disrupt the $900 billion commercial aviation market.
And that's a disruptive business we want to be a part of for the long term.
The slow and steady aviation play
Heico doesn't get the publicity of a growth stock like Virgin Galactic, but it's a fundamental supplier to the entire aviation industry and definitely profitable for its investors. The company's flight support business makes replacement parts for aircraft, and its electronic technologies business makes subcomponents and subsystems for aviation, defense, medical, and more.
Through a tremendous series of acquisitions and operational improvements, the company has nearly quadrupled its revenue in the past decade and seen net income jump nearly 700%.
Heico's management has a long history of generating strong and consistent returns for investors and they will continue to do so once the COVID-19 pandemic will be over.
The military aviation giant
Lockheed Martin is one of the biggest military contractors in the country, with $59.8 billion in revenue in 2019 and an impressive $6.2 billion in earnings. The company may see a negative impact from COVID-19, but military spending isn't likely to take a hit like commercial air travel will.
Investors in aerospace should appreciate the consistency of the military business that Lockheed Martin has built, and that's why it's one of the top stocks in the industry.
Air travel is down but not out
The aerospace sector is going through a very rough patch at the moment given the dramatic downturn in commercial air travel that will likely last for a year or maybe even more. But Virgin Galactic, Heico, and Lockheed Martin all have secure businesses that should carry them through this economic downturn and deliver them safely on the other side. Those looking to invest in solid businesses that look set for the long term could do worse than these three names.
Part of this article originally appeared on Fool.com
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