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Increased defense spending initiatives may boost the fortunes of US aerospace and defense companies, but the industry's commercial sector will continue to face difficulties. Fierce competition in the airliner construction market between Boeing Co and Airbus Industries is likely to remain in the doldrums over the near term. Investors are cautioned to focus their investments on those that are ranked 1 or 2 for Timeleliness.

Profits for the major aircraft manufacturers have been elusive in 1998, although Airbus Industrie and Boeing Co have been very productive, and Airbus may restructure as a private company over French government delays. US civilian and military leaders for the armed forces have also suggested that military US military needs to be increased, and this will have an impact on the industry. Investors need to concentrate on the most timely defense and aerospace stocks for consideration.

The Republican-dominated Congress will stem the decline in defense spending, boosting the fortunes of aerospace and defense companies. Other developments favorable to the industry include a $1.5 billion UK contract for Lockheed's C-130J cargo-carrier and renewed Air Force support for McDonnell-Douglas' C-17. The depressed airliner market will soon benefit from large Chinese and Saudi Arabian orders. Still, only stocks bearing Value Line rankings of 1 or 2 are recommended.

The prospects for aerospace/defense industry stocks are evaluated. Defense spending cuts could level off, if the Nov 1994 Congressional elections result in gains for conservatives. Lockheed and Martin Marietta plan to form a 'merger of equals,' but the deal is subject to antitrust review. No upturn is in sight for the commercial aircraft sector. Evaluations of individual stocks are included.

The aerospace and defense industry should continue to exhibit little if any growth in the near term. The airliner manufacturer sector could exhibit strong growth in 1995 or 1996 due to an increase in demand by air transportation operators. The defense sector of this industry should continue to exhibit declines in its performance, part of which is due to the net decline in military appropriations. Investors should be careful with their choices in this industry.

The aerospace and defense industries are suffering from a decline in aircraft demand. However, demand for commercial aircraft will eventually rise because 2,900 aircraft in the current fleet are destined for the scrap pile. The turn in demand could happen as soon as 1996 and become strong by the end of the century. Potential investors should choose company stocks with Timeliness ranks of 1 or 2 and realize that any investment in this industry is risky.