Boeing Airlines (NYSE:BA) has a fresh target in mind. The company, at the moment, is focusing on getting big orders from across the globe. It is adopting various methods to make it happen. The tech giant has introduced a new low-cost, fuel-efficient aircraft. It is also planning to increase its production rate which will help the company generate increased revenue in the future.
Boeing turned out to be a show stealer at the Dubai Air Show. BA’s long-haul aircraft 777X’s performance at the show simply did wonders for the company. The 777X is 12% more fuel efficient and 10% more cost effective than its arch rival European Aeronautic Defense and Space Company’s Airbus aircraft-A350. With its brilliant fuel efficiency and cost benefits, the 777X model generated orders worth a whopping $101.5 billion after the Dubai Air Show. Compared to that, the Airbus generated orders worth $44 billion. The three Middle-Eastern airlines including Emirates, Qatar and Etihad ordered 225 aircraft amounting to $95 billion. Out of this, the Emirates alone placed orders of about $55.6 billion.
- Warning! GuruFocus has detected 4 Warning Signs with BA. Click here to check it out.
- BA 15-Year Financial Data
- The intrinsic value of BA
- Peter Lynch Chart of BA
Boeing is now on the lookout for a new location for setting up a production facility for its new 777X. The company has already received proposals for about 54 sites from 22 states. Experts think that Washington would be the best location for setting up a factory because the company has a past experience of manufacturing the 777 aircraft series there. Secondly, Washington also offers the lowest cost and risk combination which allows the company an easy access to a trained workforce and state incentives including low cost land and faster regulatory permission with tax incentives of $8.7 billion. The deliveries for 787 won’t begin before 2020 as the company is taking some time to start manufacturing these air beasts. To speed-up its 787 manufacturing activities, Boeing has decided to expand its South Carolina facility. Construction is expected to begin sometime in 2014 and is expected to end around mid-2016. This facility would be used to paint the assembled 787s fully and help Boeing avoid unnecessary delays in delivering these aircrafts to the customers. The 787 is currently assembled at this facility and is then flown to Fort Worth for final touches and painting. After this it is again flown back to South Carolina ready for delivery. If this facility is set up it would save the company some dollars that are spent in order to fly the aircraft to various locations before finally making it ready for delivery.
The company’s operating cash flow has increased to double to $6.8 billion in the first nine months of this financial year. By increasing the production rate of 787s and delivering the aircrafts on time to the customers will help the company achieve strong top-line growth with the expected operating cash flow of about $7 billion this year. The company’s backlog for 787 Dreamliner is more than 900. Till date the company has delivered only 103 787s and for 2013 it has delivered only 54 aircrafts with year-over-year growth of about 10.2%. By getting the new facility functioning soon the company would be able to work on a lot of these faults and overcome the backlogs as soon as possible.
Higher Revenues from 787 Dreamliner Family In 2014:
By increasing the 787 Dreamliner productions, the company can easily expect to earn higher revenue in 2014. The company estimates that it would deliver anywhere between 50-60 787 aircrafts in 2013. With this production rate the company will comfortably achieve their target and could end up delivering another seven to eight of these aircrafts by the year end. This would generate astounding revenues with $2 billion being generated for December alone and more than $5.5 billion for the fourth quarter of this fiscal year.
The large orders that Boeing has received for its 777X airplane after the Dubai Air Show has strengthened the company’s revenue base. With the commencement of production the company is surely going to perform well in the next quarter. This apart, the company’s move to enhance production of the 787 Dreamliner will help them overcome the backlog and even generate huge revenues. With all the factors going in Boeing’s favor, it seems to be the right time to invest in Boeing’s stocks. For the record, Boeing’s quarterly dividend has increased by around 50% to $2.92.