Is Boeing an Attractive Investment?

With shares of Boeing (NYSE:BA) trading around $135, is BA an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Boeing is an aerospace company. It focuses primarily on engineering, information technology, research and development, test and evaluation, technology strategy development, environmental remediation management, and intellectual property management. The company operates in five segments: Commercial Airplanes, Boeing Military Aircraft, Network & Space Systems, Global Services & Support, and Boeing Capital Corp.

Boeing’s name is most often mentioned with its troubled 787 Dreamliner, which has not helped its image with carriers, investors or travelers. However, the company expects that as it moves to an era when the 787 is one of its best selling models, the “transition” from its older models will not hamper sales. John Wojick, senior vice president of global sales and marketing at Boeing Commercial Airplanes, told Reuters that he “was confident of selling enough of the current 777-300ER, which is sold out until 2017, to fill the gap until a new revamped 777X version enters service in 2020, without having to cut production.” Boeing had also sold enough of the existing 737NG models to ensure a smooth transition to the new 737 MAX. Some of this success depends on poor decisions, or a deep slumber, at rival Airbus.

T = Technicals on the Stock Chart Are Strong

Boeing stock has been trending higher over the past couple of months. The stock is currently moving higher and looks set to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Boeing is trading above its rising key averages which signal neutral to bullish price action in the near-term.

BA

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Boeing options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Boeing options

17.72%

16%

14%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on BOEING’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for BOEING look like and more importantly, how did the markets like these numbers?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

-11.11%

28.77%

11.85%

11.02%

Revenue Growth (Y-O-Y)

8.31%

6.65%

10.61%

9.05%

Earnings Reaction

2.41%

-5.33%

5.33%

-0.77%

Boeing has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Boeing’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Boeing stock done relative to its peers, Lockheed Martin (NYSE:LMT), Spirit Aerosystems (NYSE:SPR), Northrop Grumman (NYSE:NOC), and sector?

Boeing

Lockheed Martin

Spirit Aerosystems

Northrop Grumman

Sector

Year-to-Date Return

-0.70%

10.33%

-4.56%

6.39%

3.86%

Boeing has been an average performer, year-to-date.

Conclusion

Boeing is an aerospace company and provider of aircrafts and related products and services to corporations and governments worldwide. The company expects that as it moves to an era when the 787 is one of its best-selling models, the “transition” from its older models will not hamper sales. The stock has been trending higher over the past couple of months and looks set to continue. Over the last four quarters, earnings and revenue figures have increased, which has left investors pleased. Relative to its peers and sector, Boeing has been an average year-to-date performer. Look for Boeing to OUTPERFORM.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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