On Aug 12, 2014, we issued an updated research report on the
The Boeing Co.
). The company's second-quarter 2014 earnings were above the Street
expectation while the top line missed the mark. It reported
impressive second quarter earnings as strong commercial margins,
large tax settlements and buybacks offset soft revenues and a
charge on the KC-46.
A steady improvement in passenger and freight traffic has spurred
the demand for Boeing's commercial airplanes. Its commercial
deliveries jumped almost 7.1% year over year in the second quarter
2014. The heightened deliveries were also a function of an
increased production rate. During the quarter, the Next Generation
737 model proved yet again its unfailing popularity, delivering 124
airplanes, followed by its 787 model with 30 deliveries.
The company is slated to benefit greatly from improving air traffic
which is projected to grow 5% annually over the next two decades.
Overall, Boeing anticipates the commercial fleet to double over the
next two decades to 42,180 airplanes. About 58% of the demand is
likely to come from the emerging markets like Asia, Latin America,
the Middle East and Africa, and 42% from the U.S., Europe and
Boeing is also one of the major players in the defense business. On
this front, Long Range Strike (LRS) can offset a certain part of
the fighter sales that are at risk. Pentagon plans to invest
approximately $3.5 billion per annum in LRS development by the end
of the decade, and most likely step up investments once production
ramps. The company is also expanding its presence in cyber
security, intelligence and surveillance and unmanned systems, where
growth rates are higher than the overall defense budget.
Internationally, the company is witnessing strong demand for its
defense products, such as fighter jets, the rotorcraft line-up and
737-based military derivatives. With a stringent budget
environment, rising foreign military sales (FMS) contracts are also
more than welcome.
In spite of rising FMS deals, this defense giant continues to face
the risk of U.S. defense budget cuts, the uncertain fate of
high-cost programs, risks related to key project executions and
In recent times, Boeing's share price movement also seems to be
reflecting lurking fears of a possible shutdown of the U.S.
Export-Import Bank (Ex-Im Bank). The company's many non-U.S.
customers finance aircraft purchases through the Ex-Im Bank. The
bank's charter is set to expire on Sep 30, 2014. Boeing would be
the prime loser if Washington decides to put the shutters down on
the bank, as the company is its single-largest beneficiary,
receiving public financing for the sale of aircraft to foreign
airlines. The U.S. Ex-Im Bank currently supports approximately 18%
of Boeing Commercial Airplanes deliveries.
Zacks Rank & Other Stocks
Boeing carries a Zacks Rank #2 (Buy). Other players worth
considering include general Dynamics Corp. (
), Lockheed Martin Corp. (
) and Northrop Grumman Corp. (
). All these stocks carry the same Zacks Rank as Boeing.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
NORTHROP GRUMMN (NOC): Free Stock Analysis
BOEING CO (BA): Free Stock Analysis Report
GENL DYNAMICS (GD): Free Stock Analysis Report
LOCKHEED MARTIN (LMT): Free Stock Analysis
To read this article on Zacks.com click here.