Melrose Industries (LON: MRO) is gaining traction as the aerospace sector stages a robust recovery, positioning the company for renewed growth and investor optimism. The UK-based industrial powerhouse, known for its ownership of GKN Aerospace, is emerging as a key beneficiary of the resurgence in both commercial and defense aviation markets.
Melrose recently reported a strong set of financial results, with 2024 revenues climbing 11% to £3.47 billion and adjusted operating profit soaring 42% to £540 million. This impressive performance was fueled by brisk demand in its engines and aftermarket divisions, with the Engines Division alone posting a 26% revenue increase. The aftermarket repair business also expanded 18% year-on-year, supported by a higher volume of certified parts and the successful ramp-up of its Malaysia facility.
The company’s defense segment, which accounts for about a third of its business, is particularly well-positioned. As global military budgets rise and the UK government emphasizes “war-fighting readiness,” Melrose’s role as a supplier for critical programs such as the F-35 fighter jet and the Gripen RM12 engine upgrade is expected to drive further growth. The Swedish military business, in particular, contributed to a 32% surge in aftermarket revenues, reflecting heightened demand for support and upgrades.
Despite challenges such as supply chain disruptions and the lingering financial impact of the Pratt & Whitney GTF engine powder metal issue—expected to total around £200 million through 2027—Melrose remains optimistic. The company’s diversified global footprint and contractual arrangements have helped mitigate the effects of recent tariffs and supply chain headwinds.
Looking ahead, Melrose has set ambitious targets, aiming for revenues of £5 billion and operating profits exceeding £1.2 billion by 2029. Analyst sentiment remains positive, with a consensus of buy ratings and a projected average target price indicating significant upside potential. While the share price has experienced volatility, the underlying fundamentals and strategic positioning suggest that Melrose is well-placed to capitalize on the aerospace sector’s ongoing recovery.
As the industry continues to rebound from pandemic-era setbacks, Melrose Industries stands out as a compelling opportunity for investors seeking exposure to the revitalized aerospace and defense markets.
