Morningstar

Boeing and Airbus: Backlogs Bring Tactical Tariff Options, but Beware Cost Inflation All Over Again

We still believe both firms’ wide economic moats are intact.

El logotipo de Boeing aparece en una pantalla sobre un puesto de negociación en el parqué de la Bolsa de Nueva York.
Richard Drew
Securities in This Article
Airbus SE
(AIR)
Boeing Co
(BA)
Airbus SE
(AIR)

We modeled a scenario in which the sweeping tariffs on US imports announced on April 2 by President Donald Trump, including 20% on those from the European Union, persist until January 2029. We assume reciprocal tariffs on US exports to the EU for this exercise.

Long view: Key for both Boeing BA and Airbus AIR are their enormous backlogs. As long as tariffs remain, these could provide tactical ways to defray the impact to the companies’ top lines. In the medium term at least, they could redirect deliveries to customers or lessors in tariff-free destinations.

Key stats: We believe the primary impact to both firms would be input cost growth. We estimated the proportions of directly imported inputs, as well as those from their tier 1 and 2 suppliers. We assumed an average 15% tariff rate, resulting in an 8.5% increase in manufacturing cost.

  • The results for both manufacturers are tens of billions of increased costs, which we believe they could eventually recoup in long-dated new orders, but nonetheless would affect our fair value estimates by amounts proportional to cost growth.

The bottom line: We haven’t altered our $200 fair value for Boeing or EUR 165 fair value estimate for Airbus ($43.50 for its US depositary shares). Notwithstanding the chaotic circumstances, we believe both firms’ wide economic moats are intact.

  • Boeing’s share price has declined 14% since April 2, making the shares 32% undervalued relative to our fair value estimate and 27% below our tariff scenario fair value estimate of $186.
  • Airbus shares have traded down 9.5% since April 2, making the shares 11% undervalued relative to our fair value estimate and 2% below our tariff scenario fair value estimate of EUR 151 ($41.70 for the US depositary shares).

Between the lines: It is ironic, perhaps, that the stated purpose of the tariffs is to promote US domestic manufacturing, when the US aerospace industry exported $136 billion of goods in 2024, second only to oil exports and lowering the overall US trade deficit by 13%.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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