Drivers for aerospace companies in the stock markets

febrero 3, 2016 por
Archivado en la categoría: Análisis 

Recently we have seen an abrupt descent on crude oil prices and their impact on all stock exchange markets. In the aerospace industry we know that oil prices have a high influence in airlines, because fuel has been the principal direct cost, up to 50% of the total amount when oil prices reached their maximum.

If this is true, any analyst could think that now that oil prices are reaching minimums, airlines and aircraft manufacturers may be experiencing high rises in the stock markets. Is this completely true?

At first, let’s take a look at a comparison between Boeing Company and Crude Oil prices. Clearly, the strong descent of oil prices at the end of 2014 lead to a big ascent in Boeing shares. Nevertheless, oil prices do not explain the Boeing ascent during 2013. Furthermore, the oil prices descent during 2015 do not have a correspondence in the evolution of Boeing stocks in 2015.

01Stock-Oil-vs-Boeing

 CRUDE OIL  ::   BOEING CO 

The situation of Airbus is nearly the same:

 

02Stock-Oil-vs-Airbus

CRUDE OIL::   AIRBUS GROUP SE 

Let`s not forget about currency exchange and its impact on Airbus. It is well known that Profit & Loss in the European manufacturer is highly dependent on the EUR/USD rate, because they mainly sell in USD and buy in EUR, as their supply chain is mostly located in Europe. Although there are some similar signs, the prices do not “rhyme” perfectly.

03Stock-Forex-vs-Airbus

 EURO / DOLLAR USA ::   AIRBUS GROUP 

Boeing does not have this currency problem, but we can see a similar behavior in the shares price against EUR/USD exchange. So, we can conclude this is not the explanation.

04Stock-Forex-vs-Boeing

 EURO / DOLLAR USA ::  BOEING CO 

05Stock-Airbus-vs-Boeing

 AIRBUS GROUP SE ::   BOEING CO

Let’s continue with our search. What about airlines?

06Stock-Airbus-vs-IAG

 INTERNATIONAL CONSOLIDATED AIRLINES GROUP SA ::  AIRBUS GROUP SE 

Well, this song is much more melodic! It is something not surprising, though, if my customer is fine, I will be fine.

But then, Airlines value are not uniquely linked to oil prices, even though oil prices may be up to 50% of their direct cost. Is this serious? Are markets crazy?

07Stock-GDP

08Stock-Unemployment

In 2013, the indicator that really changed was employment tendency after the economic crisis. Either in EU and the US, all macroeconomic indicators started to show signs of recovery and inversion of the recession tendency. This leads to more employment, more development and more money to spend.

As many studies have shown, the evolution of air traffic is directly linked to the evolution of GDP. If macroeconomic indicators show a positive tendency, no wonder airlines share prices will grow up. This is the explanation why in 2013 IAG, Airbus and Boeing earned value while oil prices remained high.

It is true that significant changes in oil prices and EUR/USD exchange prices do have an impact on industrial companies’ value, but they are limited in time, and in the long run, GDP and macroeconomic tendencies have the lead role in the evolution of these companies in the stock markets.

 

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