Three aviation stocks with long runways for growth

Recent disasters have led to a pullback in in stock prices of aircraft manufacturers – making these three names attractive

Vikram Barhat 27 March, 2019 | 5:00PM

Ethiopian Airlines’ disastrous plane crash earlier this month has brought undue attention to the aviation industry. The deadliest plane crash in the state carrier’s history came barely six months after a similar Lion Air passenger plane crash that killed everyone onboard. Both doomed flights involved Boeing 737 MAX 8 passenger airplanes, hitting the company stock hard, wiping out billions of dollars in market value, and dragging down the Dow Jones Industrial Average.

As a slew of countries reacted by grounding the aircraft in question, Boeing has been scrambling to contain the fallout. Nervous investors have been quick to trim their holdings of aviation stocks. However, the panic and resultant pullback in stock prices of aircraft manufacturers mask the healthy growth outlook for the airline industry. The global airline industry is forecasted to net US$35.5 billion in profit in 2019, led by North America, according to the world airline association The International Air Transport Association (IATA). Lower fuel prices, solid, albeit slower, economic growth, and a robust demand for passenger travel in leading markets will keep the aviation industry humming for the foreseeable future, notes the IATA report.

These airline trends create a tailwind for aircraft manufacturers and component makers as greater profitability spurs airlines to expand route network and add new aircraft to their fleet. The current weakness in the stock prices of aircraft manufacturers has created a buying opportunity. With strong fundamentals and diversified business, these companies can bounce back from any short-term headwinds crated by negative news cycles.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Boeing Co148.34 USD-8.43
Embraer SA ADR7.19 USD0.28
United Technologies Corp97.53 USD0.39

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry. He also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.