Boeing shares (LON:BOE / NYSE: BA) have been something of a disaster to hold since November. Most of the fall-out has been around its ongoing issues with the high profile Boeing 737 MAX aircraft, grounded for months now due to software issues that have caused at least one crash and possibly more.
Being reported last week, and doubled its estimate of the cost of grounding the 737 MAX. Boeing shares were up over 1% on the day, as the market had been expecting worse. Investors in Boeing stock also took notice when the company moved to shore up liquidity – surprisingly, we thought – with a further $12 billion in new loan commitments.
Boeing’s share price cannot be seen in isolation
But Boeing is a company that does not stand in isolation, and the poor fortunes of such a giant, which has seen its share price punished relentlessly this winter, can have knock on effects on other companies which you might own.
The obvious candidates are airlines. In this case, the bigger the fleet, the less impact there is going to be from not having access to the 737 MAX. But some airlines are going to be impacted as expensive assets like jets sit on the tarmac gathering dust.
Notably, Ryanair (LON: RYA) has seen its share price picking up even in the face of concerns over the coronavirus. Ryanair shares were up 5% on Monday after better than expected Q3 numbers. Ryanair is waiting on delivering of Boeing 737 MAX aircraft, but that does not seem to have slowed the Irish airline, which saw better than expected Christmas and New Year bookings and seems to have also weathered the Brexit storm.
The lack of the Boeing aircraft is being seen as more of a medium term risk for Ryanair, however. Management has already said it will need to push back its target of flying 200 million passengers per year by two years as a consequence of Boeing’s problems. Ryanair says it does not now expect to see the new planes until September at the earliest. Ryanair shares are trading up from a €14.86 close on Friday, to hit €16.36 today on the Q3 numbers.
Boeing 737 components manufacturers are another risk area
Boeing woes are having more of an impact elsewhere however. Senior shares (LON: SNR) have suffered, falling 9% on Friday as Senior issued another warning.
Senior makes oxygen tubes and other engine components for Boeing, including the MAX aircraft. Its management had already warned that the problems at Boeing would eat into its own margins. Senior said its aerospace revenue is expected to be down 20% on 2019 levels but that it would return to growth next year.
Senior shares have been dropping in value since mid-September, when they stood at around 208. They had been trading in the 178-188 range from late October, which seemed to be a new, acceptable level for the market, but fears over Boeing have pushed them down again and they broke the key 177 level on 14 January. At time of writing they were at 169 and could well brush past their 52 week low of 149 in the next few days if they continue on their current trend.
But there are other stocks which could be taking a hit. Melrose Industries shares (LON: MRO) may be eroded, as Melrose makes lip skins and wiring for the 737 MAX. Other suppliers of components like Senior include QinetiQ (LON: QQ) and Meggitt (LON: MGGT). All these stocks are exposed to Boeing to varying degrees. With such a huge aviation program on hold they are bound to have to factor in some damage from Boeing.
On the upside, losses could be temporary as eventually the 737 MAX will be back in action. But there are a lot of contributors to the program which are being forced to keep a big slice of their capacity on hold this year and this will cost them.
Related coverage on The Armchair Trader:
- Boeing shares grapple with more bad news
- Peter Watson on Boeing’s troubles
- Melrose Industries shares on the rise – is it all good news?
- Tread carefully on Ryanair shares, say the analysts
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