We are downgrading our recommendation on Boeing to Neutral from
Outperform as we believe the company will trade in line with the
broader market indices. This is in keeping with the risks this
defense giant faces from U.S. defense budget cuts, the uncertain
fate of high-cost programs, risks related to key project executions
and order cancellations. Nonetheless, the company seems to have
retained its title of the world's largest commercial airplane
manufacturer, given its impressive track record in both innovation
and fuel efficiency. Recently, Boeing reported solid third-quarter
results buoyed by higher commercial aircraft deliveries. It raised
its full-year core earnings forecast for the third time, thanks to
booming commercial aircraft demand. The company's move to further
consolidate its defense business is in sync with its efforts to
reduce overhead costs in the business.
Headquartered in Chicago, The Boeing Company is a premier jet
aircraft manufacturer and one of the largest defense contractors in
the U.S. The company's customers include domestic and foreign
airlines, the U.S. Department of Defense (DoD), the Department of
Homeland Security, the National Aeronautics and Space
Administration (NASA), other aerospace prime contractors, and
certain U.S. government and commercial communications
The company operates through the following segments:
Boeing Commercial Airplanes (BCA) Segment This segment develops,
produces, and markets commercial jets, along with providing related
support services. The company is a leading producer of commercial
aircraft and has a series (737 Next-Generation narrow-body model
and the 747, 767, 777 and 787 wide-body models) of commercial
jetliners designed to meet a broad spectrum of passenger and cargo
requirements of domestic and non-U.S. airlines.
The three segments that comprise the Boeing Defense, Space &
Security (BDS) businesses are as follows:
Boeing Military Aircraft (BMA) Segment is engaged in the
research, development, production, and modification of military
aircraft precision engagement and mobility products and
Network and Space Systems (N&SS) Segment is engaged in the
research, development, production, and modification of products and
services to assist customers in transforming their operations
through network integration, intelligence and surveillance systems,
communications, architectures, and space exploration.
Global Services and Support (GS&S) Segment is engaged in the
operations, maintenance, training, upgrades, and logistics support
functions for military platforms and operations.
Boeing Capital Corporation (BCC) Segment In the commercial
aircraft market, BCC facilitates, arranges, structures and provides
selective financing solutions for the Commercial Airplanes segment
customers. In the space and defense markets, BCC arranges and
structures financing solutions for BDS segment government
customers. Boeing Capital Corporation's portfolio consists of
equipment under operating leases, finance leases, notes and other
receivables, assets held for sale or re-lease and investments.
Other Segment The Other segment includes the activities of
Engineering, Operations and Technology (EO&T) and certain
inter-company items. Engineering, Operations and Technology is an
advanced research and development organization focused on
innovative technologies, improved processes and the creation of new
The Boeing Company (BA): Read the Full Research
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