Daily Management Review

Fears of trade war with China crushed shares of Boeing


The main indices of the US stock market fell amid growing fears in the US of the response of the authorities of China to import duties of the Trump administration.

Prayitno via flickr
Prayitno via flickr
Following the auction on the New York Stock Exchange on Wednesday, March 14, the Dow Jones and S&P 500 index fell by 1% and 0.6% respectively. Shares of the Boeing corporation showed "worse than the market dynamics" among large companies, losing 2.5% at the end of the session.

The growth of negative sentiment in the US stock market sparked fears about a potential trade war between the US and China, after the Trump administration announced the introduction of import duties. In addition to duties on steel and aluminum, the US authorities also plan new restrictions against China's products in other sectors.

The Wall Street Journal, citing unnamed sources in the Trump administration, reported that the US authorities want to reduce China's surplus in trade with the US by $ 100 billion.

A number of other American media, in particular the New York Times, suggested that Boeing might become the "response" for China after applying fees from the US.

In February 2018, MarketWatch noted that Boeing shares showed the best dynamics among DJIA index companies: over the past 12 months, the company's quotes increased by 116.8%. However, over the past few weeks, from the end of February to the current day, Boeing shares, according to FactSet, fell 9.4%.

Concerns about the growth of production costs in the event of aggravation of US economic relations with major trading partners in the near future, will remain one of the main factors of pressure on quotes of American companies according to many estimates.

Earlier, Boeing published its earnings report. In the fourth quarter, the tax reform improved Boeing's earnings by $ 1.74 per share, and it is expected that the positive impact will continue this year. The aircraft manufacturer also received significant revenue from sales of the 787 Dreamliner.

In the profit report, the company forecasted the first annual sales growth from 2015 and stated that the cash flow from operating activities will reach $ 15 billion.

Adjusted profit of Boeing in the IV quarter increased from $ 2.47 to $ 4.80 per share, or $ 3.06 per share, excluding the effect of tax reform in the US. Analysts interviewed by Bloomberg on average predicted an adjusted profit of $ 2.90 per share.

Revenues increased by 8.9% to $ 25.4 billion compared to the expected $ 24.7 billion.

Revenues from commercial aircraft in the fourth quarter increased by 7.5% to $ 15.5 billion, as Boeing delivered a record 209 commercial aircraft, including 148 Boeing 737. Operating margin was 11.5% compared to 8.3% a year earlier.

The quarterly revenues of the military and space program division grew 4.8% to $ 5.54 billion, while its 10% operating margin slightly improved compared to the previous year.

The concern expects an increase in sales in 2018. Boeing is pushing the production of aircraft 737 up by 11% and hopes for additional benefits from tax cuts. Revenues will be from $ 96 billion to $ 98 billion, the company predicts. The forecast of analysts is $ 93.6 billion.

source: wsj.com, marketwatch.com

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