Sell Block: Boeing's Grounded Until End of Strike
Factory strikes at Boeing are hurting more than just this company. Everyone who supplies this airplane maker is taking a hit, too.
That’s why Cramer put Boeing and its suppliers – Spirit Aerosystems, Rockwell Collins, Precision Castparts, Goodrich and Hexcel – in the Sell Block this week.
“If Boeing’s not buying,” Cramer said, “you can bet that means a real hit to the earnings of its suppliers.”
Boeing accounts for 87% of Spirit Aerosystems’ sales. As a result, the company’s already suspended 2008 guidance, cut the work week to three days for many of its workers, and announced that layoffs loom. Spirit could take a 6% hit to 2008 earnings from a month-long strike.
Precision Castparts gets just 17% of sales from Boeing, but the strike could cost 1.7% of its earnings. Rockwell Collins comes in at 14% of sales and could take a hit worth 0.6%, but this company’s already laid off 80 people for 60 days because of the strike and has delayed hiring 200 more.
The last two suppliers, Goodrich and Hexcel, are feeling the pain just as much. Goodrich gets 10% of sales from Boeing and 2008 earnings should end up losing 0.5%. Hexcel brings in 25% of its business from Boeing and like Spirit Aerosystems withdrew its 2008 guidance and reduced production.
Spirit Aerosystems and Rockwell Collins were up Thursday, so Cramer recommended selling into the strength. Boeing will eventually be a buy – but not until the strike ends.
A previous version of this post listed Rockwell Automation as a supplier to Boeing. In fact, it's Rockwell Collins. The companies were formed when Rockwell International split into two separate businesses. Rockwell Automation has no airlines exposure, a spokesperson said.
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