Boeing Co. (NYSE : BA) has recently settled with machinists after workers accepted a contract.
The aerospace giant could face further challenges, especially if Donald Trump is elected as the next President of the United States.
Michael Kantrowitz is the chief investment strategist of Piper Sandler. He believes that the implications of a Trump Presidency could lead to further declines for Boeing’s stock. Boeing’s shares are already down by about 40% as Americans head to vote today.
Boeing’s impact on a Trump presidency
Trump has proposed Elon Musk as the head of a government efficiency panel whose goal is to reduce government costs by up $3 trillion.
This move could negatively impact companies that rely on government contracts. Boeing, for example, derives 37% of its total revenue from federal contracts.
If Musk is successful in implementing spending cuts, Boeing could lose a significant part of its revenue, which will likely put downward pressure on the stock price.
Boeing is facing multiple challenges at the same time as the anticipated reduction in government expenditures.
Recently, the company announced that it would sell stock to raise up $22 billion in order to strengthen its balance sheet. It has also suspended dividend payments so as to keep income investors interested.
Analysts predict a $179 target, which would indicate a potential 20% gain.
Boeing Stock: The challenges that continue
The recent resolution of the strike that cost Boeing an estimated $5 billion in lost earnings may have relieved some pressure but the terms of this new agreement could lead significantly higher costs over the next few years.
The company has committed to an increase in wages of 38% for its employees over the next four-year period, which will put further strain on its finances.
Boeing, with its headquarters in Arlington County, Virginia implements plans to reduce their global workforce by 10%. This translates to around 17,000 layoffs.
Boeing’s debt of over $50 billion and its consistent quarterly losses may discourage investors from buying Boeing stock.
Other defense contractors, such as Lockheed Martin, could also be challenged if Trump returns to his White House.
Kantrowitz predicts healthcare companies such as Humana, UnitedHealth and others may suffer setbacks because of reduced federal spending on health under the Trump administration.
Boeing faces a complex environment at the intersection of government policies, financial health and labor agreements.
Investors should closely monitor the political environment and its possible impact on the Aerospace giant’s stock price.
This post Will a Trump Presidency spell Trouble for Boeing Stock? This post may be updated as new information becomes available
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