After hearing the very jarring forecast that Boeing gave on Wednesday, Jim Cramer could only conclude that the aerospace group has peaked.
“That doesn’t mean the companies involved in the space are necessarily dead,” the “Mad Money” host said.
For example, United Technologies reported a solid quarter and Cramer was astonished with how strong its aircraft engine business was. That could be attributed the success to its new geared turbo fan.
Cramer interpreted the weaker forecast from Boeing as an indication that airlines no longer require as many airplanes as originally thought. This could stem from several factors: perhaps leasing companies that buy the planes have stopped purchasing for an unknown reason, or perhaps the Chinese are rethinking demand or are out of money to buy them.
“Perhaps the problem is more Boeing than we think,” Cramer said.(Tweet This)
“I think we need to lend some credence to the idea that we might have to factor in a possible aerospace peak.”
Boeing represents America uniquely, but that doesn’t mean the other parts makers do. United Technologies does a large amount of business with Airbus, which has some huge orders from Iran and has taken leadership in plane wins from Boeing.
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Customers would need to buy dollars first before they buy planes from Boeing, and maybe they would rather buy an Airbus in debased euro before purchasing anything Boeing makes in dollars.
Cramer suspected this could be the reason why the stock of United Technologies was able to go up on such a hideous day on the markets. Its new engine is taking both shares and profits from the competition.
“I think we need to lend some credence to the idea that we might have to factor in a possible aerospace peak,” Cramer said.
Cramer recommended that if there are downgrades on Thursday, investors should buy Honeywell before it reports on Friday. He is willing to bet that Honeywell will be a lot more like United Technologies than Boeing, especially given the business lines it has away from aerospace.