Trump may bring turbulence to boeing – the boeing company (nyse_ba) _ seeking alpha

Boeing (NYSE: BA) is an American brand that has the dominant market share in a duopoly with Airbus ( OTCPK:EADSY) ( OTCPK:EADSF). Bank interest rates for fixed deposits in india The Company, boasting a $93 billion market cap, is up 8.3% year-to-date. Union bank of india interest rates 2013 Since November 8 (immediately prior to the US election), BA has underperformed the S&P 500 by about 2%, increasing 5.5%. Fixed deposit interest rates in indian bank The DJIA, of which BA is a component, is up 4.5% during the same period.

The Company competes and is profitable both in the commercial airplane (68% of revenues and 43% of profits – 9 months ended September 30, 2016) and defense (32% of revenues and 57% of profits) segments. Bank loan interest rates in sri lanka As such, the Company both has risks (higher dollar and interest rates, negative impact of anti-trade actions) and opportunities (expected higher defense spending) from the policies (real and perceived) of President-elect Trump.

BA’s forward multiple is 16x and the Company’s PEG (PE/5-Year Growth Estimate) is 1.65. Bank loan interest rates for business These ratios are reasonable if growth continues and would be considered overvalued if growth falters. Bank fd interest rates comparison Earnings estimates have actually ticked up, to a projected $9.39 in fiscal 2017, from $9.37 30 days following the election. Rates of interest offered by different bank As outlined below, the lack of material change in these estimates suggests the negatives for BA associated with the Trump Presidency may not have been fully assessed.

While running for office, President-elect Trump’s platform loudly called for tariffs and competitive retaliation against both foreign countries and companies.


Bank interest rates in india for senior citizens As has been widely reported, President-elect Trump has vowed to name China a ” currency manipulator” and has threatened to impose 45% tariffs on imports from the country.

BA notes that it derives “70% of commercial airplane revenue (historically) from customers outside the United States.” BA recently forecast that China (domestic airlines) is expected to purchase 6,810 ($1.0 trillion) planes over the next 20 years. Standard bank interest rates fixed deposits Currently, as reported by Bloomberg, BA earns about 12% of annual revenue from China.

If the Trump administration follows through on its threats, China, would almost certainly retaliate against the US in general, and iconic brands like BA (and Apple (NASDAQ: AAPL)) would serve as highly visible scapegoats. Commonwealth bank interest rates term deposits The China Times, as reported in HotHardware.com, noted “China is willing to use the nuclear option with regards to trade… Bank interest rates 2014 india a batch of Boeing orders will be replaced by Airbus… Best bank account interest rates US auto and iPhone sales in China will suffer a setback.” These are not idle threats; in 2014, amid US charges of Chinese hacking, China aggressively retaliated against Cisco (NASDAQ: CSCO) and IBM (NYSE: IBM).

To placate Chinese authorities, BA announced a plan to open a plant in China (Airbus already has an assembly facility in China); Trump denounced this move. Canara bank fd interest rates 2013 Speaking of the Trump risk to BA, aerospace consultant Kevin Michaels notes, “Boeing has to be as worried as anyone… Highest bank interest rates country it would be horrible and a huge boom to Airbus.”

While the above discussion focuses on China, other countries are likely to use influence with their national carriers to shift aircraft orders if the US imposes tariffs on imports.

The impact on revenues from trade retaliation is hard to predict; it is almost impossible to envision a scenario where increased tariffs and/or a trade war would be anything but materially negative for BA.

While not strictly related to trade policy, BA’s recently announced letter of intent with Iran, worth up to $25 billion, would also be at risk from changes in the US-Iran relationship. Bank of india interest rates President-elect Trump has spoken frequently about his displeasure with the Iran nuclear deal. Bank interest rates for fixed deposits in sbi Iran would almost certainly retaliate against the US (and BA by extension) in the event the agreement is unilaterally changed.

While not as dramatic as the rise of the US dollar in 2014, the US dollar has appreciated about 4% and 6% against the Euro and Yen, respectively, as well as against other relevant currencies in the post-election period. Fixed deposit interest rates in indian bank 2015 While BA typically prices its aircraft in US dollars, foreign buyers must convert their currency into dollars, effectively making US dollar products materially more expensive in a rising dollar environment.

Unlike other exporters, the impact of a strong US dollar on BA will be seen indirectly in the form of reduced sales (as prices rise) and/or lower margins (price cuts to hold market share) as opposed to a loss on currency translation.

The strong dollar is not expected to be a short-term phenomenon. Bank account interest rates canada As noted in the Wall Street Journal, multiple analysts, including Citibank and Brown Brothers Harriman, are projecting the US dollar to reach parity with the Euro within six-to-twelve months.

As readers know, we have been in an extended period of historically low interest rates. Bank interest rates on fixed deposits for senior citizen Post-election, the yield on the US 10-year has already increased by about 50 basis points.

While BA is not a large borrower, almost all customers either finance or lease (indirectly financing) aircraft purchases. Highest bank fd interest rates 2013 A 50 basis point increase in interest rates (assuming a 10-year loan, and a rate increasing to 5%) would increase payments by 2.5%.

The Ex-Im Bank, which helps finance US exports, was almost eliminated in 2015. Bank of melbourne interest rates It almost certainly will be killed by the Trump administration. Bank account interest rates comparison While the impact of losing this financing conduit is uncertain, in April, BA noted “some airlines might not be able to accept new planes… Andhra bank interest rates fixed deposits in the absence of US Export-Import Bank support for aircraft and engine sales.”

While BA’s public reputation is focused on commercial aircraft, as noted above, about 1/3 of sales and the majority of profits are garnered from military sales. Best bank deposit interest rates uk President-elect Trump and members of the Republican legislative majority have loudly called for increased military spending. Latest bank interest rates on fixed deposits in india BA would be a recipient of the (future) rising tide in military spending. Canara bank rd interest rates Unlike, commercial aircraft, the focus of higher tariffs would not cause the same level of retaliation by foreign buyers of BA’s military/security products.

BA would benefit from higher interest rates with respect to the Company’s underfunded pension liabilities. Dhanalakshmi bank interest rates fixed deposits As of September 30, 2016, the net pension liability on BA’s balance sheet was $18 billion. Best bank fixed deposit interest rates in singapore Higher interest rates will enable the Company to increase its assumptions regarding future returns and reduce the balance sheet value of the present value of future obligations. Bank loan interest rates in india While these are non-cash changes, the changes in pension assumptions will be seen on the income statement.

BA used a 30% effective tax rate in its 2016 financial outlook. Bank loan interest rates in nigeria A decrease in the US tax rate would materially impact BA. Bank interest rates on fixed deposits 2013 A reduction to 22% (a level recommended by Barron’s this week), would increase net income by $405 million or $0.58/share (diluted).

BA continues to be an American icon and a leader in commercial aircraft. Best bank interest rates australia I am concerned the current stock price (and lack of estimate movement) fails to consider the negatives associated with the Trump Presidency. Union bank fd interest rates 2014 Specifically, trade restrictions and a stronger US dollar will have material impacts on BA’s earnings and hence its stock price. Indian bank interest rates for fixed deposits These negatives will be partially offset by pension benefits associated with higher interest rates and the potential for a lower US tax rate.

In the risks to earnings section, S&P does not mention the above risks, only commenting, “slower global economic growth, incremental US defense budget pressures and… Bank fd interest rates comparison india cost overruns.” It is my opinion that the market has not properly considered the highlighted negatives (as well as the positives) in the wake of euphoria about potentially lower US tax rates.

I wrote this article myself, and it expresses my own opinions. Yes bank fd interest rates for senior citizens I am not receiving compensation for it (other than from Seeking Alpha). Union bank of india interest rates on fixed deposits 2014 I have no business relationship with any company whose stock is mentioned in this article.

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