Boeing Looks Set to Soar but Dreamliner Deliveries are Key

Boeing ( BA ) recently announced its Q2 earnings results. The company's commercial airplanes division was the big winner this quarter as both aircraft deliveries and prices rose leading to revenue and operating income growth of 19% and 35% for the division, respectively. The last half of 2011 remains crucial for the company as the 787 Dreamliner is scheduled to make its first delivery in September 2011. Boeing competes in the commercial aircraft market with aerospace giant Airbus as well as Embraer and Bombardier. The company also competes in the defense segment with large defense contractors such as Lockheed Martin ( LMT ), Northrop Grummann ( NOC ) and BAE Systems.

We have a revised price estimate of $91 for Boeing's stock , which is roughly 30% above the current market price. The price reflects adjustments made to aircraft delivery forecasts in the commercial airplanes division as well as the company's current net cash/debt position.

Narrow Body 737 still Strong, But Airbus Catching Up

Total commercial airplane deliveries for Boeing rose by 4% over Q2 to 118 for this quarter out of which 94 were Boeing 737 narrow-body aircraft.

However, in a significant development last month, American Airlines might be splitting the 250 narrow-body jet order between Boeing and Airbus. With the deal pegged at around $15 billion, this could signify Airbus gaining significant market share on Boeing's home turf in the U.S. The move also puts pressure on Boeing to redesign its 737 model, which increasingly faces competition from Airbus' newly designed A320. With single-aisle aircraft being the largest commercial aircraft segment in future, there could be a potential downside to Boeing's market share of new aircraft deliveries in future, which could pose downside risks to our estimates.

Commercial airplane deliveries account for over 50% of our price estimate.

787 Deliveries Crucial for Q3 and Q4 Results

Boeing expects to deliver the first 787 Dreamliner in the third quarter of 2011. With over 827 orders from 57 customers, the 787 is a major source of future revenue and earnings for the company. The aircraft is nearing completion of flight testing and has begun the first stages of final assembly at Boeing's South Carolina assembly site. However, concerns over the production ramp-up of the 787 still persist given past delays and the recent cuts in projected 787 deliveries this year. As Boeing starts to deliver these aircraft, the overhang of uncertainly will start to wane and could provide support for shares later this year.

See our full analysis for Boeing

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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