Boeing Negotiates a Big 787 Order - Analyst Blog

By Zacks Equity Research,

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As per a media report, international aerospace giant The Boeing Co. ( BA ) is in talks with Indonesia based Lion Air for 10 '787 Dreamliners. The potential value of the deal is estimated at $2 billion.

Boeing has a long relationship with Lion Air. The Indonesian carrier has till date primarily ordered for the 737 model for its fleet. Besides, the airliner was the launch customer for 737-900 Extended Range (ER) in June 2005 with an order for 30 airplanes. Up to now Lion Air has placed orders for 408 airplanes from the 737 family.

We believe Lion Air's decision to migrate from its favored 737 variant to the 787 model is due to 787's capability to fly a longer distance and carry more passengers. The international commercial airline market holds a lot of potential in the future. The airline operators are gearing up to meet the increasing demand for air travel.

Lion Air is also in talks with Boeing's arch rival Airbus for new commercial airplanes. However, 787 Dreamliners' far improved capabilities and Lion Air's long standing relationship with Boeing might tilt the order in the company's favor.

Gross orders received by Boeing for its 787 variant till May 22, 2012 were 19 airplanes while cancellation during the period climbed to  25 airplanes, taking the net order number to a negative 6. We believe that if the company can secure the 787 order from Lion Air, the order book for 787 for the year will turn positive.

787 Dreamliner sales form an integral part of Boeing's commercial aircraft success. The company targets to deliver 35 to 42 '787 airplanes to its customers in 2012. In the first four months of the year Boeing has delivered 8 '787 airplanes.

The Boeing 737 model has consistently grabbed orders and if the company can sort out the problem relating to the timely delivery of 787 aircrafts it can easily achieve its $47.5 billion to $49.5 billion projected revenue target for commercial airplanes in 2012.  

Chicago-based Boeing Co. has a Zacks #3 Rank (short-term Hold rating). The company competes with the likes of General Dynamics Corp. ( GD ), Lockheed Martin Corporation ( LMT ) and Northrop Grumman Corporation ( NOC ) in various niches.

BOEING CO (BA): Free Stock Analysis Report
GENL DYNAMICS (GD): Free Stock Analysis Report
LOCKHEED MARTIN (LMT): Free Stock Analysis Report
NORTHROP GRUMMN (NOC): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: BA , GD , LMT , NOC

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