The Boeing Company ( BA )
received a purchase order for 60 Boeing 737 MAX Aircrafts from
Brazilian airliner, GOL Linhas Aereas Inteligentes
S.A. ( GOL ). The order is valued at approximately $6
billion at published list prices. Boeing will deliver the airplanes
in 2018. GOL Linhas said it will use the new aircraft mainly to
renew its fleet in the future.
The 737 MAX is Boeing's newest family of airplanes comprising 737
MAX 7, 737 MAX 8 and 737 MAX 9. Equipped with the new-engine
variant powered by Commercial Fan Motor ("CFM") International
LEAP-1B engines, the 737 MAX is high on fuel efficiency and low on
carbon dioxide emissions. The use of Advanced Technology winglet
also enhances its performance. The interior of the airplanes
comprise pivoting overhead stowage bins, which add to the
spaciousness of the cabin. The bins give passengers more room to
keep a carry-on roll-aboard near their own seat apart from
providing additional leg space. The 737 MAX 8 is expected to incur
lowest operating costs in the single-aisle category.
The 737 MAX has a high demand in the single-aisle market. This is
primarily attributable to expansion of air services in India,
China, Indonesia and several other emerging nations and the
popularity of the low-cost carriers ("LCC") business model around
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%.
Inspired 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
L-3 Communications Holdings Inc.
BOEING CO (BA): Free Stock Analysis Report
GENL DYNAMICS (GD): Free Stock Analysis Report
GOL LINHAS-ADR (GOL): Free Stock Analysis
L-3 COMM HLDGS (LLL): Free Stock Analysis
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