Can Boeing Stock Fly Passed a Lost Deal?

With shares of Boeing (NYSE:BA) trading around $116, 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 has lost an important deal with Japan Airlines, which has decided to order 31 Airbus A350 jets in the airline’s first ever purchase from Boeing’s European rival, Bloomberg Businessweek reports. The agreement includes the option for 25 more planes. Boeing has been dominate in Japan for years, but Japan Airlines has suffered more than other airlines from technical issues in Boeing’s 787 Dreamliner. The order brings Airbus’ share of the Japanese market up to 20 percent, and could lead to more deals for Airbus in the country.

T = Technicals on the Stock Chart Are Strong

Boeing stock has been surging higher in recent quarters. The stock is currently trading near all time high prices and looks like it may need time to consolidate before heading higher. 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

30.12%

96%

94%

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

Put IV Skew

Call IV Skew

October Options

Flat

Average

November 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 very significant 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 Mixed 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?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

11.02%

18.03%

-30.91%

-7.53%

Revenue Growth (Y-O-Y)

9.05%

-2.53%

14.05%

12.87%

Earnings Reaction

-0.77%

3.00%

1.27%

-0.15%

Boeing has seen mixed earnings and rising revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Boeing’s recent earnings announcements.

P = Excellent 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

54.88%

34.38%

43.13%

40.17%

39.32%

Boeing has been a relative performance leader, year-to-date.

Conclusion

Boeing is an aerospace company and provider of aircrafts and related products and services to corporations and governments worldwide. It seems as if Boeing has lost an important deal to one of their European competitors, Airbus. The stock has been surging higher and is now trading near all time high prices. Over the last four quarters, earnings have been mixed while revenues have been rising which have produced conflicting feelings among investors. Relative to its peers and sector, Boeing has been a year-to-date performance leader. Look for Boeing to OUTPERFORM.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

More Articles About:   , , ,  

More from The Cheat Sheet