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Five Stocks That Could Be Impacted by AMR's Bankruptcy

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These manufacturers could be in trouble if AMR doesn't persevere.

It seems like it was only yesterday when Rodman & Renshaw reiterated its Market Outperform rating and $5 PT on AMR (NYSE: AMR).

That's probably because it was yesterday. Oh what a difference 24 hours can make.

Following the news that AMR had filed for chapter 11, analysts from all over began to weigh in. But the response hasn't been as harsh as you might think. Despite today's news, Sterne Agee is maintaining its position on the stock.

Alex Hamilton, an analyst with Early Bird Capital, told Benzinga that he doesn't think that Boeing (NYSE: BA) or Airbus will be impacted by AMR's bankruptcy. Other analysts have some concerns, but the consensus agrees with Hamilton's assessment.

If, however, Boeing and Airbus' orders fall through, who would be affected? Next to Boeing, which corporations stand to suffer the most from AMR's (potential) demise? Let's take a look.

BE Aerospace

As a designer and manufacturer of jet cabin interior products, BE Aerospace (NASDAQ: BEAV) relies heavily on the production of new aircrafts. If AMR fails to emerge from bankruptcy, aircraft manufacturers would have one less client to sell their planes to, which could reduce the need for the interior products BE Aerospace provides.

Rockwell Collins

Right now, AMR doesn't have any use for new planes. Thus, it does not need any of the aviation electronics designed by Rockwell Collins (NYSE: COL). This could be tough for the company to swallow, especially at a time when the economy is still struggling, when consumers are still avoiding airports, and when orders for new planes are still somewhat lackluster.

United Technologies

Even before AMR's announcement, United Technologies (NYSE: UTX) was suffering. While the stock began the year at nearly $80, and soared to $90 in May, UTX is currently struggling to recover from massive summer declines. At the moment, shares are trading in the $73 range, which is better than its year low of $67.44 (which occurred on August 10), but is far from the year high.

Going forward, United Technologies could have a hard time recovering if big airlines or airline operators like AMR begin to disappear. Let's not forget that AMR is not the first company within the airline industry to file for bankruptcy.

General Electric

Realistically, General Electric (NYSE: GE) is safe. It is a company that manufacturers more consumer and commercial products than I could ever list in one article. That said, GE is a big player in the aerospace industry. And if Boeing and Airbus suffer as a result of AMR's restructuring, the pain could eventually trickle down to GE.

Honeywell International

While GE has several divisions and many industries to profit from, Honeywell International (NYSE: HON) is very focused on the aerospace industry. Consequently, it is imperative that it continues to have clients that need its equipment, especially its turbine propulsion engines.

ACTION ITEMS:

Bullish:

Those who believe in AMR (and think that the company's latest troubles are temporary) should consider the following trades:

  • The aforementioned aerospace companies – BE Aerospace, Rockwell Collins, United Technologies, and Honeywell International – could obviously benefit (if only on a small scale) from AMR's recovery.
  • Boeing may not soar on AMR's survival, but it certainly won't hurt the stock. If AMR were to fall, however, Boeing would lose one of its largest clients.

Bearish:

If you expect the worst-case scenario to occur (in which AMR would not be able to emerge from bankruptcy, and American Airlines would close or be sold off to the highest bidder), you might want to consider this alternative:

  • Take another look at General Electric, which is stronger through diversification, and can adapt to changes (like a drop in aerospace sales) much faster than other players in the industry.

Follow me @LouisBedigian

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: Alex Hamilton American Airlines AMR Early Bird CapitalLong Ideas Short Ideas Trading Ideas General Best of Benzinga

 

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