Boeing (BA, Financial) has been a long-term shareholder value creator and I expect the company to continue delivering strong numbers and dividends in the coming quarters. On April 22, 2015, Boeing declared its 1Q2015 results and this article discusses the results and the outlook for FY2015.
Overall, the results were strong in my view with Boeing reporting revenue growth of 8% for 1Q2015 to $22.1 billion as compared to $20.5 billion in 1Q2014. The company’s core EPS for 1Q2015 was $1.97 per share as compared to $1.76 per share in 1Q2014. From a shareholder value creation perspective, the company repurchased 17 million shares during the quarter for $2.5 billion.
Looking at the outlook, I expect Boeing to continue to deliver strong numbers over the next few quarters. As of 1Q2015, the company had an order backlog of $495 billion and this will translate into steady revenue growth and strong cash inflow in the coming years.
One of the key reasons for liking Boeing is the fact that the company pays a healthy dividend of $3.64 per share and the dividend is sustainable. Further, the company is well positioned financially to increase its dividends. To put things into perspective, Boeing had cash and equivalents of $9.6 billion as of 1Q2015 as compared to a debt balance of $9 billion.
Therefore, the company is net debt free and Boeing expects to generate an operating cash flow of $9 billion in FY2015. In other words, the company’s cash position will only get stronger and I expect higher allocation in the coming years towards dividends and share repurchase.
These points from a fundamental perspective make Boeing a portfolio stock and I believe that the stock is also not expensive considering the forward PE. For FY15, Boeing expects GAAP EPS of $8.1 to $8.3 per share and considering the mid-range of the guidance, the EPS is likely to be $8.2 per share. At a current stock price of $151, the forward PE (December 2015) comes to 18.4 and this is certainly not expensive for a company with steady growth, strong order backlog, high dividends and a strong credit rating. Boeing is rated A, A2 and A respectively by S&P, Moody’s and Fitch.
It is also important to mention here that global geo-political tensions are escalating and I believe that this is positive for the company’s defence, space and security division. This segment will continue to be a key growth driver for the coming in the coming years and I expect the other book for this segment to swell further.
In conclusion, Boeing is an excellent stock to hold for the long-term for steady capital appreciation as well as robust dividends. A strong order backlog ensures high revenue and cash visibility that will drive strong shareholder value creation.
