Should You Forget Boeing and Buy These 2 Hot Growth Stocks Instead?

If investors want exposure to aerospace in their portfolio, then Boeing (NYSE: BA) is a good place to start. Still, I think there are plenty of other stocks to look at with exposure to the same end markets, and companies like Woodward (NASDAQ: WWD) and Hexcel (NYSE: HXL) (both Boeing suppliers) spring to mind. Here's why they might be a better value on a risk/reward basis, and a look at whether it would be smart to "ignore" Boeing.

Three things Boeing needs to do

The things Boeing needs to do can be seen as challenges or opportunities.

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1. Turn around the loss-making Boeing Defense, Space & Security (BDS) segment, and in particular, the fixed-price development programs that have caused multiyear delays and multibillion-dollar losses.
2. Make progress on developing and launching the wide-body 777X and the new generation of narrow-body airplanes.
3. Successfully ramp up production of airplanes, most notably the narrow-body 737 MAX, and to a lesser extent the wide-body 787.

BDS, Hegseth, and defense budgets

Turning BDS to profitability looks like more of a challenge than an opportunity right now. Management believes BDS could turn cash flow positive in 2026 or 2027, and even that mediocre outlook could be challenged if Defense Secretary Pete Hegseth cuts the Pentagon budget as expected. An additional challenging wrinkle, the troublesome (for Boeing) fixed-price development programs could be seen as a win by the U.S. government as it leverages its negotiating position with defense contractors, which might encourage the government to insist on more fixed-price defense programs.

Boeing 777X and the next generation of narrow-body airplanes

The second point is slightly more of a challenge than an opportunity right now. Management believes the first delivery of the 777X will take place in 2026, but as discussed in a previous article, its key 777X customer, the Emirates airline, is reportedly expecting delivery delays. Moreover, the problems on the 737 MAX mean Boeing may struggle to generate the cash necessary to fund the next generation of narrow-body airplanes without seeking financing. Wall Street analysts' consensus has Boeing carrying $20.7 billion worth of net debt at the end of 2027.

Image source: Boeing.

Ramping up 737 MAX production

Now the good news. Despite the difficulties in recent years, ramping up the production and deliveries of the 737 MAX is definitely more of an opportunity than a challenge.

The chart below shows deliveries bouncing back in January and February after the strike-induced slowdown in the autumn was resolved. Moreover, there's an increasing sense of optimism, not least from engine manufacturers, that Boeing can hit a delivery rate of 38 a month on the 737 MAX and then take it higher in the second half of 2025.

Data source: Boeing. Chart by author.

If Boeing achieves its aims with a ramp-up in deliveries on the 737 MAX, the stock will likely move higher, as this issue is more important than the other two in the near term.

Woodward and Hexcel

Woodward and Hexcel both have significant exposure to Boeing and Airbus. These two stocks are attractive because they will benefit from increased airplane production, and given the multiyear backlogs at Boeing and Airbus, and their commitment to ramping up production, it's a favorable market.

Moreover, both companies will have excellent exposure to the next generation of airplanes and airplane engines in the long term. In commercial aerospace, Hexcel's lightweight composites help reduce weight and improve fuel efficiency. Similarly, Woodward is developing technologies designed to improve engine fuel efficiency, lower fuel consumption, and reduce emissions.

As you can see below, they both trade at highly attractive cash-flow valuations for companies exposed to an increase in airplane production and increased content on newer-generation planes.

Data source: Company presentations, marketscreener.com. Calculations by author.

Are Hexcel and Woodward stocks to buy?

Boeing is facing challenges, but don't forget it just yet. Ramping up 737 MAX deliveries is the single biggest step that will move the needle on its stock, and so far, the outlook is positive in 2025. That said, for investors looking beyond Boeing in aerospace, Hexcel and Woodward look like excellent long-term values and better stocks than Boeing on a risk/reward basis.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Hexcel and RTX. The Motley Fool has a disclosure policy.