started the second half of the year with a nice win, removing potential business
Both stocks, however, are bullish because the battle for market share in the single-aisle segment of the commercial aerospace market is nothing new.
The fight for share will continue long into the future. And an order for aircraft of the A320 family is not something
(point: BA) investors should really be worried.
(AIR. France) announced orders for 292 A320 family aircraft with
China Eastern Airlines
China Southern Airlines
(ZNH,) and Shenzhen Airlines.
All three airlines already fly A320 family aircraft. Also, they all fly Boeing 737-type aircraft. Boeing planes account for about 45% of the single-aisle jets now using these aircraft.
This aligns, very roughly, with the two aircraft manufacturers’ single-aisle market shares. Boeing has about 4,100 backlogs for 737 jets, while Airbus has about 5,800 for A320 and A321 planes. That gives Airbus around 58% of orders, although both companies track orders a little differently.
Boeing has also had some success in the single aisle of late, managing to oust an Airbus customer in May.
International Consolidated Airlines Group
(IAG. London) ordered 50 Boeing 737 MAX aircraft, with options for another 100 aircraft. IAG currently flies only Airbus aircraft in the single-aisle market where Boeing and Airbus compete.
Airbus shares rose 3% in overseas trading on Friday. Boeing stock, however, made progress, rising about 1.5% in late Friday trading. The
Dow Jones Industrial Average
both rose about 0.7%.
The deal shows that Airbus’ victory isn’t really bad news for Boeing. And that’s a very good thing for Boeing investors. They don’t want any more bad news.
Boeing investors had a terrible first half of the year: Shares fell 32%, falling significantly both times the company reported earnings. The stock lost 4.8% in January after Boeing’s fourth-quarter 2021 results fell short of Wall Street expectations. They fell 7.5% in late April after the company, again, reported a much larger-than-expected loss for the first quarter of 2022.
Airbus stock didn’t have a good first half either, falling about 18%.
The bottom line is that the commercial aerospace industry continues to face headwinds related to Covid. And the recovery in air traffic just hasn’t happened as quickly as investors expected, says Bank of America analyst Andrew Obin Barron’s.
China’s second-quarter battle with Covid-19 certainly played a role in the delayed recovery. Areas including Shanghai were under lockdown for weeks as officials battled infections.
However, Wall Street is still holding out hope for Boeing stock. More than 80% of analysts covering the company rate the stock Buy, while the average Buy rating ratio for S&P 500 stocks is around 58%.
The average analyst price target is about $216 per share, up about 55% from current levels.
For Boeing stock to reach those heights, it won’t need to take market share from Airbus. Boeing just needs to put its own house in order and do things like start delivering the 787 jet again. Deliveries have been suspended as Boeing works through manufacturing quality issues with the Federal Aviation Administration.
Write to Al Root at firstname.lastname@example.org