Boeing shares continue to feel the negative impact of the expanding crisis related to its 737 Max jet, falling 15% since early March with its market value plunging by $37 billion. The stocks of major suppliers to Boeing have remained largely unscathed thus far, but that's likely to change as the company proceeds with plans to cut production of the 737 Max jet by 20% in the wake of two deadly crashes, according to a detailed story in Barron’s.
Many of these suppliers are heavily dependent on Boeing for their livelihood, most of them getting 10% to 78% of their sales from the airline giant, as illustrated by the table below. If the global grounding of the jet persists longer than analysts expect, shares of major suppliers like Spirit AeroSystems Holdings Inc. (SPR), Triumph Group Inc. (TGI), Astronics Corp. (ATRO), Moog Inc. (MOG.A), Woodward Inc. (WWD), TransDigm Group Inc. (TDG), and Curtiss-Wright Corp. (CW) could be badly hurt, per Barron's.
7 Stocks That May Get Hurt By Boeing
(company; % sales generated from Boeing; and what they make)
- Spirit AeroSystems; 78%; aero structures and aircraft components.
- Triumph; 31%; aero structures and aircraft components.
- Astronics; 14%; specialized lighting, control systems and electronics.
- Moog; 14%; precision motion control components and systems.
- Woodward; 12%; energy control systems and components.
- TransDigm; 10%; aerospace parts and instruments.
- Curtiss-Wright; 8%; precision components and engineered products.
Source: Barron’s, Bloomberg.
What it Means
Boeing’s shares began slipping in early March and fell further since the Ethiopian Airlines crash on March 10. At the moment, fifteen pure-play aerospace suppliers tracked by Barron’s have escaped Boeing's crisis, and are up over the same period.
But that could change. Other Boeing suppliers that could suffer include United Technologies Corp. (UTX), General Electric Co. (GE), Honeywell International Inc. (HON), Allegheny Technologies Inc. (ATI), Arconic Inc. (ARNC), and Hexcel Corporation (HXL).
Following the March 10 crash, which killed 157 people, governments around the world grounded or banned from their airspace the 737 Max jets. The tragedy came just five months after a similar Indonesian Lion Air jet crashed into the ocean, killing 189 people. Wall Street analysts expect the 737 Max to be back in the air again by the end of June. But if they are wrong, both the shares of Boeing and its suppliers could face greater downward pressure.
Boeing officially took responsibility for the crashes last week, an important step for getting its planes approved to fly again. But even if Boeing jets may get official approval, the company will still have to repair its reputation, and persuade both airlines and consumers to use the 737 Max again. That could prove to be a daunting challenge.