The Boeing Company ( BA ) and
GE Capital Aviation Services, or GECAS, the commercial aircraft
leasing and financing arm of General Electric
Company ( GE ), finalized a firm order for 85 737s, which
includes 75 737 MAX 8s and 10 Next-Generation 737-800s. The order
allows for up to 15 additional 737-800s. The order is worth $6
billion at list prices.
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With this order, GECAS has ordered 580 airplanes directly from
Boeing since 1995, which includes 737s, 747s, 757s, 767s and 777s.
To date, GECAS has taken delivery of 433 of the
GECAS, the U.S. and Irish commercial aircraft financing and
leasing business of GE, has a fleet of over 1,710 owned and
serviced aircraft with approximately 235 airlines in over 75
countries. GECAS offers a wide range of aircraft types and
financing options, including operating leases and secured debt
financing, and also provides productivity solutions including spare
engine leasing, spare parts financing and management. GECAS, a unit
of GE Capital, has offices in 24 cities around the world.
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
Dynamics Corporation ( GD ) and
L-3 Communications Holdings Inc. ( LLL