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Boeing Co (BA) Stock Appears to Be Ready to Soar On Paris Show Order Strength

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With world-class investors such as Warren Buffett now shifting perspectives on the airline industry and its suppliers, such as Boeing Co (NYSE: BA ), mainstream investors looking to ride on the Oracle of Omaha's coattails are taking a closer look at BA stock.

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Boeing remains a world-class company with a bright long-term future, thus BA stock may turn out to be much less cyclical than many bearish investors may indicate. Here are a few fundamental reasons why I believe this is so.

Strong Product Offering

At the most recent Paris Air Show last month, airplane enthusiasts, international corporate executives, and investors from all over the globe gathered to observe and analyze the newest offerings of the large multinational aerospace firms. The traditional rivalries again took center stage, with American manufacturer BA squaring off against its European counterpart Airbus SE (EPA: AIR ) in latest round of their long-standing battle for global market share.

The annual convention typically provides a measuring stick of how the respective rivals are expected to perform over the coming years, as the orders each company takes in for its newest planes will drive revenues and profitability in the future. BA's new 737 single-aisle Max 10 aircraft sparked considerable interest among buyers at the show, with the company securing 571 airplane orders for a total of nearly $75 billion, besting the orders of rival AIR, which showed off it comparable A320neo aircraft.

While AIR executives pointed to the fact that the A320neo is superior to the 737 Max 10 model in terms of passenger capacity, range, and fuel efficiency, a flurry of demand for American-made airliners from primarily Asian buyers looking to cash in on a travel boom among an burgeoning Asian middle class, turned out to be the deciding factor for the top spot for most orders made during the show.

Strong Order Backlog

The strong showing in the Paris event complements BA's already-impressive order backlog; The aircraft maker currently has a total contract backlog of $462 billion , with another $18 billion in the form of unobligated order backlog, as of Q1 2017.

This impressive backlog - which is continuing to grow - is one of the reasons why in March 2016 I set a 12-month price target of $196 for BA stock when market sentiment for the airplane manufacturer appeared to be increasingly bearish due to reductions in long-term global growth rates and the potential for deflationary or contractionary economic situations in key global markets.

Bottom Line on Boeing Stock

The ability of BA stock to continue to climb higher is linked to a number of key fundamental factors, one of which is the ability of the company to continue to generate orders in greater volume and scope than those of its peers. With competition for global market share remaining fierce, the ability of BA to best AIR order book for the first time in a few years is an indication that the company is moving in the right direction.

That said, the ability of Boeing to monetize its significant order backlog quicker and more efficiently is likely to be the catalyst that will take BA stock higher over the coming quarters and years. Close examination of it operating efficiencies - key fundamental ratios such as return on assets and return on invested capital - will remain a critical part of the analysis investors interested in taking a position in BA will need to perform.

As of this writing, Chris MacDonald did not hold a position in any of the aforementioned securities.

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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