What's going on?
American aerospace giant Boeing reported sky-high quarterly earnings on Wednesday – and said it was clear skies ahead for the rest of this year!
What does this mean?
Boeing’s profits not only beat investors’ expectations during the first quarter but are well above where they were in recent years, thanks to determined cost-cutting measures and swelling order books. And steadily increasing passenger air travel isn’t the only thing going Boeing’s way: one notable boost came from growing demand for package-delivery jets from the likes of Amazon and FedEx. Boeing has also gotten more efficient at producing its jumbo jets – easier said than done in heavy industry – and profits from its commercial airplane division jumped 73% versus last year.
Why should I care?
For markets: Despite a few recent bumps, Boeing’s stock was up Wednesday.
After clocking in as one of the best-performing stocks on US markets last year, Boeing has tumbled in recent months as new tariffs on steel and aluminum imports into the US looked likely to threaten its business. Earlier this week, Boeing’s stock dropped around 3% on Tuesday as investors appeared to get skittish on the profit growth potential for heavy industry and defense stocks in 2018 – and while Boeing’s earnings beat was enough to help it claw back a portion of those losses, some are still surprised its bumper earnings didn’t push it up even further….
The bigger picture: Heavy industry’s iron throne is showing some corrosion.
According to some, the heady days of shooting stock prices and ever-growing earnings seen in 2017 may be coming to an end, thanks to increasing commodity prices and rising interest rates (which mean companies have to pay more to borrow money) eating away at profits like rust on a girder. Though Boeing’s prediction of higher profits in 2018 may yet prove the naysayers wrong, some observers allege that the relatively muted reaction of Boeing’s stock to such positive earnings proves that the overall climate has changed.