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Boeing Is the Way to Go

May 04, 2014 | About:
Nitish

Nitish

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Boeing (BA) continues its good run at the market. The company has a market cap of a whopping 94.76 billion and P/E of 22.40. The industry experts were expecting the stock to deliver an EPS of $1.56 but the aero-giant significantly beat expectations and did better by around 20 cents to reach an EPS of $1.76. The company has also generated revenues of over $20.5 billion.

The company has seen a strong growth in revenue. The current revenue growth at 8% is the result of a strong order book that the company has managed to maintain over the past one year. There was a decline in net earnings of $1.1 billion last year compared to this quarter's earnings of $965 million, reflecting a decrease of 12.7%. One reason behind this plunge is the accounting write-off of $330 million related to retirement plans. There was also a one-off tax credit charge that had inflated the revenue figure in 2013. The company’s backlogs remained strong too. In fact, Q1 2014 alone saw backlogs worth $19 billion of net orders. End of quarter backlogs decreased by $1.1 billion to $439.8 billion compared to the backlogs at the end of last year.

The Performance:

The commercial airplane segment of Boeing makes up 62% of revenue and 72% of operating profit. Undoubtedly the largest segment, it contributed more than 70% towards the company’s gross earnings for the quarter. During the quarter, Boeing delivered more jets compared to the previous year. This, in turn, increased the revenue of this segment increased by 19%. The overall contribution of the segment towards the gross earnings was a whopping 12,737 million, and Boeing managed to deliver 161 airplanes. Good news is that the production of the 737 has picked up in the month of April and has reached 42 jets per month. Boeing is further targeting a rate of 47 jets per month by the year 2017 to cater to the growing demand for single-aisle aircraft in the coming years.

Owing to its superior fuel efficiency and lower operating costs compared to competing planes, the 737 Next Generation model remained the most delivered plane, with 115 deliveries. There were 24 deliveries of model 777, 18 deliveries of Dreamliner 787 and 4 deliveries of 747.

Poor Performance By The Defense And Aerospace Segment:

This segment performed poorly in the last quarter. There was a decrease in revenue of about 6% from the segment. Q1 revenue from this segment decreased to $7,633 million. The only sub-segment that showed a growth of 6% in revenue was Global Services & Support. Even the Boeing Military Aircraft sub-segment performed poorly, experiencing a revenue decrease by 13%. The operating margins also decreased from 10.3% to 10.2%. This segment, the analysts predict, is not expected to show a considerable growth in the coming years, as it has shown in the past decade.

To Conclude:

During Q1 of the current fiscal, Boeing retuned $2.5 billion to shareholders through a repurchase of 19.4 million shares. During the last decade, Boeing paid dividends each year, and the dividends increased at a CAGR of 10.8%. Apart from two difficult years, Boeing has increased dividends each year in the last ten years.

Long-term investors should consider taking exposure in the aerospace industry through Boeing, since it is expected to experience a sustained growth in the coming years. Boeing is going strong as depicted by its recent quarter performance, and it is expected to continue to lead the industry. The payout from the company has been pretty decent. With the commercial segment going great guns, the investors needn’t worry much about the dismal performance of the defense segment. Investors are therefore encouraged to take a position in BA.


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Comments

Dr. Paul Price
Dr. Paul Price premium member - 3 months ago

You never indicated Boeings price as of the date you were writing.

You don't give any 'fair value' or goal price for BA. These items are critical information for anyone deciding if BA is a good or bad buy.

Please leave your comment:


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