Earnings season is well underway, and early returns show that the commercial aftermarket headed into 2018 with significant momentum.
The good news for MRO providers: there is plenty more good news to come—at least according to two analyst surveys conducted in mid-January.
"We estimate civil deliveries grow at a 6% pace from 2017 through 2020 with the aftermarket appearing to grow at a somewhat faster pace (6-7.5%)," Jefferies analysts write in their latest aftermarket activity survey. "Following 7.7% growth in 2017, we forecast 6.5% aftermarket growth in 2018, followed by 6.4% in 2019."
Canaccord Genuity, which surveys MRO providers quarterly, says its latest responses show the strongest six-month outlook in four years.
"MROs forecast a ~7% sales increase through [June], with the growth led by the European and U.S. markets," Canaccord analyst Ken Herbert writes. "We view this as a very positive sign."
Herbert added, however, that parts-purchase outlook shows only a 5% uptick, resulting in a 2% gap compared to MRO activity— the largest we have seen it since we started this survey in 2009."
Why such a measurable disconnect? Used serviceable material explains part of it. Used parts represent 15% of all parts purchased these days, Canaccord's data shows.
Another major reason—airlines are simply getting smarter. "MROs see airline inventory management programs as the most increased headwind since our Q3/17survey," Herbert writes.
Headwinds notwithstanding, the MRO market is growing.
"Buoyed by the continued strong fundamentals," Herbert writes, "we believe the outlook for the commercial aftermarket remains very robust."