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Three Boeing ETFs to Watch on Largest China Order

Although China is struggling with its economic meltdown, it hasn't kept Boeing Co. ( BA ) from bagging its largest Chinese order and playing on the booming airline industry in the country (read: Inside The Crash in China ETFs ).

Last week, the commercial and military airplane manufacturing giant received orders and commitments for 300 jets from Chinese companies after its meeting with the President Xi Jingping. Of the 300 jets, 250 will be single aisle 737's and 50 will be wide-body jets. The total order of jets carries a list price of $38 billion, but after standard industry discounts, the actual value of the deal is typically half of that.

Boeing said that Chinese leasing companies ICBC Financial Leasing Co and China Development Bank Leasing will take 60 single aisled 737's, while the other 190 737's will be divided among China's airlines. The company did not break down the order of wide-body jets. It has also been reported that while some of the 300 jets are orders previously booked but not identified, others are commitments that would be finalized in the coming months.

China's Commercial Aircraft Corporation of China Ltd ("Comac") also signed a cooperation document with Boeing to establish a 737 completion and delivery center in China, which is currently done in Renton and at Boeing Field. This delves a strong blow to its European rival Airbus Group SE ( EADSY ), which also signed an agreement in July to set up its second plant in China.

This enormous deal will help Boeing to tap China's fast growing airline industry. Per official estimates, air passenger traffic from and within China is expected to increase nearly threefold to 1.3 billion by 2034, higher than the expected traffic of 1.2 billion for the U.S. in the same timeframe.

According to Reuters , state-owned airlines like Air China, China Eastern Airlines and China Southern Airlines, and privately owned budget carrier Spring Airlines, are growing at a fast pace, indicating a healthy industry. These airlines have announced plans to add new planes in order to meet the requirement for both short and long haul air travel. Boeing believes that China is expected to place orders for $1 trillion worth of new planes over the next two decades (read: Time for Airline ETF After Solid Earnings Season? ).

ETFs in Focus

It seems to be the right time for investors to play on the expected benefit Boeing is set to derive from this eye-catching deal. Below we highlight three top ETFs, which are heavily exposed to the aerospace giant (see all Industrial ETFs here).

iShares US Aerospace & Defense ( ITA )

This ETF tracks the Dow Jones U.S. Select Aerospace & Defense Index, giving investors exposure to the companies manufacturing commercial and military aircraft and other defense equipment in the U.S. The fund holds 38 stocks in its basket with AUM of roughly $505 million while charging 43 bps in fees and expenses. The fund exchanges roughly 44,000 shares in hand a day. Boeing occupies the top position in the basket with 8.4% of assets. The fund gained roughly 1.2% in the past one year (as of September 25, 2015). It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

PowerShares Aerospace & Defense ETF ( PPA )

This ETF follows the SPADE Defense Index, focusing on companies involved in the development, manufacturing, operations and support of U.S. defense, homeland security and aerospace operations. It has garnered about $234 million in assets. This fund trades in a volume of 41,000 shares and charges 66 bps in fees per year from investors. In total, the fund holds about 53 securities in its basket. Of these firms, Boeing takes the second spot, with roughly 6.4% share, following Lockheed Martin Corporation ( LMT ). The fund was up 1.6% in the past one year and has a Zacks ETF Rank #3 with a Medium risk outlook.

SPDR Dow Jones Industrial Average ETF ( DIA )

This popular fund tracks the Dow Jones Industrial Average and manages about $10.8 billion in its asset base, providing exposure to 31 blue-chip U.S. stocks. The ETF is very cheap with 0.17% in expense ratio while volume is very heavy at more than 6 million shares per day. Boeing occupies the fourth position in the fund with 5.4% allocation. DIA is down 4.4% in the past one year and carries a Zacks ETF Rank #3 with a Medium risk outlook (read: 6 Reasons Why JETS ETF Could Fly Higher ).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

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BOEING CO (BA): Free Stock Analysis Report

AIRBUS GROUP NV (EADSY): Free Stock Analysis Report

LOCKHEED MARTIN (LMT): Free Stock Analysis Report

ISHARS-US AEROS (ITA): ETF Research Reports

PWRSH-AERO&DEF (PPA): ETF Research Reports

SPDR-DJ IND AVG (DIA): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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