Aerospace and defense company Moog is Cowen’s top small and medium-cap pick for 2023. Analyst Cai von Rumohr reiterated the stock’s outperform rating, calling it a transition story with 40% upside from Friday’s close. He added that the company’s new CEO Pat Roche, who was the COO for the past year, has created a strong strategy for shareholder value growth. “In addition to an emphasis on ESG goals, he’s focused on boosting Moog’s profitability via (1) additional portfolio shaping, (2) focused factories (plant consolidation), and (3) simplifying the business,” von Rumohr wrote in a Monday note. “Given Moog’s strong position in attractive niche markets, we think this strategy makes lots of sense. Roche also hopes to expand Moog’s investor base by laying out Moog’s three-year goals at the company’s upcoming investor day likely in late spring/early summer. Given the success other companies have had when they articulate medium-term targets, i.e. RTX, BA, we think this initiative offers opportunity,” the analyst added. Cowen increased its price target to $131 from $122. The firm also raised its estimate for 2032 adjusted earnings per share by 10 cents to $5.80. To be sure, Moog mentioned a dip in quarter-over-quarter sales in the current quarter due to industrial demand risks, in addition to easing margins. However, von Rumohr believes that much of the company’s risks have already abated. “Moog cites Industrial demand as a possible risk; but its guide already assumes (1) Q/Q sales dip at Automation & Energy despite strong backlogs & (2) easing margins (11.0% vs. FQ1’s 12.3%),” von Rumohr wrote. “The integrated satellite bus program entails risk; but risk is abating as Moog is 80% through software development. On the plus side, Moog’s assumption of Q/Q slowing in commercial A/M sales looks cautious given 787/A350 flights are increasing with recovery of air traffic in Asia,” the analyst added. Moog shares rose 3.7% on Monday, hitting a 52-week high of $96.94. The stock rallied more than 10% in 2023, and shares are up 28% over the past 12 months. —CNBC’s Michael Bloom contributed to this report.