The Boeing Company
) announced that it received an amended type certificate from the
U.S. Federal Aviation Administration or FAA for the 787-8
Dreamliner equipped with
General Electric Company
) GEnx (General Electric Next-generation) engines.
The General Electric GEnx engine is an advanced dual rotor,
axial flow, high-bypass turbofan jet engine for Boeing airplanes.
The amended type certificate from the FAA formally recognizes that
the 787 with GE engines has demonstrated compliance with rigorous
federal regulations. Boeing noted that 60 customers around the
world have ordered more than 870 Dreamliners.
Besides its commercial airplanes business, Boeing's future
prospects to a large extent depends on the defense budget, as a
major chunk of its revenue comes from government contracts. The
turbulent Eurozone and rising possibility of U.S Defense cutback
will impact the orders and eventually slow down the growth
trajectory of the company.
The positive catalyst for the company is its strong presence in
the international commercial airline markets, which will allow the
company to capitalize on the expected growth in the commercial
space. Boeing also caters to international customers and allies
with international partners to increase efficiency through exchange
of technology. Apart from that, its strong balance sheet and
consistent cash flows provide it with necessary financial support
to increase shareholders' value and make strategic
The headwinds for the company in commercial aerospace in 2012
will be the rising cost of fuel and a weak financial outlook in
Europe, which will likely make the market turbulent in 2012.
Concurring with this view, International Air Transport Association
(IATA) said, the profitability of the commercial airline operator
will take a dip in 2012 compared to the last two years. The
downcast is mainly due to rising oil prices. IATA expects airlines
to turn a global profit of $3.0 billion in 2012 for a 0.5% margin.
This $500 million downgrade from its December 2011 forecast is
primarily because of a rise in the expected average price of oil to
$115 per barrel, up from the previously expected $99.
Boeing generates 60% of its defense revenue from fixed price
contracts. These contracts always have a risk of margin erosion or
losses due to escalation in costs. Apart from that rising
competition and delay in development and delivery of commercial
airplane also impact the future prospects of the company. Boeing
delivered its first 787 series airplane after a delay of more than
three years, which resulted in a few cancellations of orders.
Chicago-based Boeing Co. has a Zacks #3 Rank, which translates
into a short-term Hold rating. Taking into consideration the
present scenario we decided to maintain a Neutral stance over the
longer run on the company, until we find more positive catalysts
driving the results.
BOEING CO (
): Free Stock Analysis Report
GENL ELECTRIC (
): Free Stock Analysis Report
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