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Jet Stocks to Gain as Boeing Expects Rise in Europe Air Traffic

European airlines are estimated to acquire more than 8,705 new jets valued at approximately $1.5 trillion over the next 20 years.

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This story originally appeared on Zacks

After releasing an impressive forecast for the global aerospace market last week, Boeing BA, in a separate press release, revealed its outlook for the European aviation market. Per this report, 3.1% growth is forecast for annual air passenger traffic in Europe through 2040.

- Zacks

This new projection reflects an improvement when compared to the 1.8% annual growth projected for the European jet market through 2035 by Boeing in 2015.  

Highlights of the Outlook

Per the recent report, European airlines are estimated to acquire more than 8,705 new jets valued at approximately $1.5 trillion over the next 20 years. This implies an improvement of 36.4% over $1.1 trillion worth 20-year market opportunities forecast earlier by Boeing. The new forecast also reflects an increase of 16.1% over the prior projection, in terms of new airplane count.

Boeing also expects the commercial aviation services market opportunities to reach approximately $1.9 trillion through 2040.

Rationale Behind the Improved Outlook

Following the challenges posed by the COVID-19 pandemic that initially shook the commercial aerospace market, recent recoveries observed in air passenger traffic must have encouraged Boeing to estimate such improved projections. Solid demand for air travel within Europe has been leading the recovery in global and regional air travel markets.

This recovery can be attributed to a rapidly expanding leisure travel market as well as low-cost carriers available in Europe than elsewhere in the world. Also, rapid vaccination has reduced the health risk in flights, which might have played the role of another catalyst driving the improved forecast.

Moreover, as European airlines continue to invest in new, higher-capacity single-aisle models that reduce fuel use and emissions, by 2040, 90% of Europe’s current fleet is projected to get replaced with more fuel-efficient models, outpacing the global replacement share of 80%. This is likely to boost the demand for new airplanes in Europe over the long haul.

Stocks to Gain

Considering the aforementioned discussion, it is prudent to conclude that the commercial jet stocks with a significant presence in the European aviation market will witness notable growth in the coming days.  The following stocks should find a place on investors’ watchlist banking on their solid growth prospects.

Boeing has delivered 4,600 commercial aircraft to more than 130 European customers in the last 60 years, apart from providing unparalleled aerospace services to more than 350 European customers. European airlines are projected to leverage Boeing’s new-generation widebodies, such as the 787 and 777X, that significantly improve efficiency. This Zacks Rank #2 (Buy) stock boasts a long-term earnings growth rate of 4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Airbus EADSY is the largest commercial plane maker in Europe. Its versatile product line ranges in size from 100-seat jetliners to double-deck A380 that is capable of transporting more than 850 passengers. This Zacks Rank #3 (Hold) stock’s 2021 earnings estimate indicates a year-over-year improvement of 564%.

Embraer ERJ designs and manufactures commercial as well as executive jets along with providing support services for aircraft and has a strong presence in the European aviation market. In June 2021, the company announced that European carrier, Helvetic Airways, received the first of four new E195-E2 jets and another three such aircraft were in line by the end of July. This Zacks Rank #2 stock has a long-term earnings growth rate of 17%.

Textron’s TXT segment, Textron Aviation, possesses a network of seven European Service Centers, with Dusseldorf housing Textron Aviation’s second-largest parts distribution center. It has more than 225,000 parts with 90% availability and customs clearance. This Zacks Rank #2 stock has a long-term earnings growth rate of 28.3%.



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