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Airbus Tops Boeing As Largest Plane Maker: Suppliers In Focus

By Zacks Investment ResearchStock MarketsJan 02, 2020 08:41PM ET
Airbus Tops Boeing As Largest Plane Maker: Suppliers In Focus
By Zacks Investment Research   |  Jan 02, 2020 08:41PM ET
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According to a recent report released by Reuters, European aircraft giant Airbus (OTC:EADSY) has successfully excelled its 2019 delivery target of 860 planes. By delivering a forecast-beating 863 aircraft, Airbus beat its long-time rival, Boeing (NYSE:BA) , thereby seizing the title of the world’s largest plane maker, for the first time in last eight years.

As expected, this colossal announcement made on Jan 1 boosted Airbus’ share price by 1.7%.

A Sneak Peek Into Delivery Numbers

A quick survey of the delivery figures of both the aforementioned jet majors will give us a clearer picture. Airbus delivered record number of planes in the month of December, after it diverted thousands of workers and canceled holidays until hours before midnight on New Year’s Eve, which enabled it to fulfill, rather surpass its 2019 aircraft delivery target.

On the other hand, per October’s release Boeing delivered 302 commercial jets, which (as per CNBC) rose to a mere 345, considering November figures. These numbers are less than half of the 704 jets that this plane manufacturer delivered between January and November of 2018. Obviously, deliveries made by the company in December alone would not be able to help it to outnumber Airbus’ delivery count, thereby causing Boeing to lag its European competitor.

Is 737 Max to Blame?

Undoubtedly, the dramatic grounding of Boeing’s fastest-selling 737 Max planes in March 2019, followed by the production rate cut of this jetliner in April are to be blamed for this unfortunate turn of events. Needless to say, new orders dried up after two fatal crashes forced Boeing to ground 737 Max jets, while airlines refused to take any new delivery. As a result, Boeing’s commercial aircraft deliveries touched rock bottom, offering Airbus the golden opportunity to snatch its largest plane maker title.

Adding to the company’s woes, in December, Boeing decided to temporarily suspend production of its 737 Max jetliner beginning January 2020.

Suppliers in Focus

A network of almost 600 suppliers and hundreds of subcontractors manufacture components for the 737 Max. They have been partially bearing the brunt of Boeing’s troubled commercial business line. We believe, following the latest turn of events, a few of these suppliers who are also connected to Airbus’ portfolio, will try to supply more parts to Airbus to offset the losses incurred on account of 737 Max issue.

In fact, we are already witnessing such a trend among suppliers some of whom we will discuss herein. These stocks carry a Zacks Rank #2 (Buy) or Rank #3 (Hold) and thus should find place in investors’ watchlist. Let’s take a closer look at these.

CFM International — the joint venture (JV) between General Electric (NYSE:GE) and Safran (PA:SAF) SA (OTC:SAFRY) — struck a deal in December to increase production of engines for Airbus’ alternative jets to the 737 MAX. This will help the JV deal with Boeing Co.’s production halt of 737 Max. While General Electric carries a Rank of 3, Safran has a Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In October, it was announced that Spirit AeroSystems (NYSE:SPR) will acquire selected assets of Bombardier’s aerostructures and aftermarket services business. This, in turn, will provide the Zacks Rank #3 stock more manufacturing content on Airbus aircraft.

Woodward (NASDAQ:WWD) , which supplies the thrust reverser actuation system (TRAS) for 737 MAX, has been witnessing soft initial provisioning sales lately due to the plane’s grounding. The company also supplies its TRAS for Airbus A320neo aircraft. Although the company has not made any announcement yet that would indicate its shift in focus toward Airbus, given the latest delivery numbers, we may expect to see such a trend going ahead for this Rank #3 stock.

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Zacks Investment Research
Airbus Tops Boeing As Largest Plane Maker: Suppliers In Focus

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Airbus Tops Boeing As Largest Plane Maker: Suppliers In Focus

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