The Boeing Company
) lost out billions from its order book when Australian airline
Qantas Airways Limited cancelled an order for 35 of Boeing's new
787-9 airplanes. The airplanes would have been worth $8.5 billion
at list prices.
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Qantas Airways trimmed the multi-billion order after digesting a
$257 million loss for the twelve-month period ending June 30, 2012.
This was the first ever loss incurred by Qantas ever since the
airline, nicknamed the "Flying Kangaroo", went private in 1995.
Fortunes of Qantas Airways tumbled owing to sharply rising fuel
prices, a series of strikes that temporarily grounded its fleet and
its struggling international division. The financially stressed
airline is still buying 15 787-8s. It is also keeping options open
to buy as many as 50 of Boeing's 787-9 series airplanes.
The Boeing 787-9 Dreamliner is a slightly larger version of the
787-8 and can carry 250-290 passengers on routes spanning 8,000 to
8,500 nautical miles. The 787 provides airlines with higher fuel
efficiency, resulting in high environmental standards. According to
Boeing, the airplane uses 20% less fuel than its peers.
Boeing enjoys a unique position as the largest aircraft
manufacturer in the world in terms of revenues, orders and
deliveries, and is also one of the largest aerospace and defense
contractors. Besides, its revenues are spread across more than 90
countries around the globe.
Looking forward, Boeing in its 2012 Current Market Outlook
estimates a $4.5 trillion market for 34,000 new commercial
airplanes over the next 20 years. Boeing's projection of growth is
based on the strength of the commercial aviation market, recovery
witnessed in world economies and strong demand for fleet addition
and replacement. Airline traffic is forecast to grow at a 5% annual
rate over the next two decades, with cargo traffic projected to
grow at an annual rate of 5.2%.
Boosted by such strong projections, Boeing recently raised its
full-year 2012 earnings per share guidance to a range of
$4.40-$4.60 versus its earlier guidance range of $4.15-$4.35. The
company's revenue guidance for 2012 is in the range of $79.5-$81.5
billion versus the earlier range of $78.0-$80.0 billion. Commercial
Airplanes' 2012 deliveries are expected to be between 585 and 600
airplanes, which are already sold out. This includes an expected 70
to 85 787 and 747-8 deliveries. Commercial Airplanes' 2012 revenue
is expected to be between $47.5 billion and $49.5 billion with
operating margin hovering around 9.0%.
In the defense space, however, the threat of cutbacks will loom
over the company going forward. Overall, Boeing expects defense
revenue for 2012 to be between $31.5 billion and $32.0 billion with
operating margin greater than 9%.
Boeing currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Considering the fundamentals, we are
maintaining our Neutral recommendation on the stock. This is in
sync with other aerospace and defense behemoths,
General Dynamics Corporation
L-3 Communications Holdings Inc.