Boeing Co Stock Continues to Be Propelled by Multiple Tailwinds

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Among the many surprises this year, the Dow Jones Industrial Average continues to astound, recently breaking an all-time record. Equally surprising is the fact that Boeing Co (NYSE:BA) is largely responsible for the Dow’s robust rally. Posting an equity gain of more than 54% year-to-date, BA stock is, so far, the venerable index’s strongest performer.

Boeing Co (BA) Stock Continues to Be Propelled by Multiple Tailwinds

But how long can this American icon maintain this run?

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

As InvestorPlace contributor Aaron Levitt notes, Boeing stock wasn’t the first name that most people would assume would benefit from a Trump administration.

After all, presidential candidate Trump launched many potshots against the airliner and military contractor for soaring costs. Shortly after becoming president-elect, Trump took to Twitter Inc‘s (NYSE:TWTR) social-media app to blast the company, momentarily sinking shares.

However, after officially becoming the president , the rhetoric changed dramatically. One of his first acts as the commander-in-chief was to visit the Boeing facility in South Carolina. Just as Trump “taketh,” he also “giveth.” On the Monday after the Boeing visit, BA stock gapped up 1.6%. Since then, it’s been a largely uncontested ride to the top.

While President Trump talked a tough game throughout the campaign trail, that’s just what “The Donald” does. Take him too seriously or too literally at your own risk. He knows full well that to “make America great again,” his administration must foster business growth, not stymie it. Not coincidentally, along with Boeing stock, Caterpillar Inc. (NYSE:CAT) is one of the top names this year in the Dow.

But some investors may view the sharp rise in the BA stock price as a fluke. Currently, Boeing is performing markedly better than second-place Dow member Apple Inc. (NASDAQ:AAPL). Still, now is not the time to doubt BA.

Geopolitical Tensions Keep Pushing BA Stock Higher

In my view, Boeing stock has perfect catalysts for its dual businesses in military and civilian aerospace. Of course, the company’s defense division is getting major headlines because of North Korea. Not only is the threat of nuclear war boosting BA, it’s also catalyzing demand for the entire military industrial complex.

Lockheed Martin Corporation (NYSE:LMT), Northrop Grumman Corporation (NYSE:NOC), and a host of other military contractors are doing well this year. The road to a nuclear standoff requires foreplay. In this case, foreplay means a show of force, which is no better demonstrated than flying fighter jets at North Korea’s doorstep. Naturally, the BA stock price, along with aerospace-specific investments, will benefit.

So long as the hermit nation isn’t that stupid, the geopolitical conflict is almost too perfect for Boeing stock. For America to not look cowardly, it needs more “tickets to the gun show.” That translates to more military hardware.

We also need to think internationally. Japanese Prime Minister Shinzo Abe enjoyed a resounding election win, giving his administration the necessary political leverage to revise Japan’s constitution. A fiercely pacifist nation after World War II, North Korean belligerence has forced Japan to reexamine its security protocol. That reexamination means great things for the BA stock price.

Although Japan maintains a Self-Defense Force, it lacks offensive capabilities. This vulnerability will likely change, and President Trump, ironically, will see that it does. Under the White House’s “America First” policy, Trump demands that American allies take up their fair share. Thus, Boeing stands to potentially gain lucrative military contracts, which in turn should drive up Boeing stock.

The Civilian Business is also Booming for Boeing stock

Fortunately, not all the bullish arguments center around doomsday scenarios. The commercial airline business is also booming, which benefits BA stock as well.

It’s no secret that air travel these days is sometimes reminiscent of jungle warfare rather than a means of transportation. Yet, despite all the troubles and headaches of flying, people are doing it more than ever. In 2015 and 2016, growth in air-travel demand averaged nearly 7.4%. This year, growth is also estimated at 7.4%.

Between 2011 through 2014, air-travel growth averaged only 5.6%.

Essentially, no matter how many times passengers complain about smaller seat sizes or the food, they keep coming back. In order to stay ahead of the demand, airline manufacturers need to pump out more of their products.

While it’s true that Boeing stock has enjoyed a remarkable ride, contrarians should pick another play for their bearish ventures. Companies would kill just to have one massive tailwind driving their share price. BA has the luxury of two, and the momentum for both is far from dying out.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/10/boeing-co-ba-stock-propelled-multiple-tailwinds/.

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