Can Boeing’s Stock Fly Higher?

With shares of The Boeing Company (NYSE:BA) trading at around $84.88, 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:

C = Catalyst for the Stock’s Movement

A Dreamliner 787 was supposed to fly last Saturday, but that test flight was delayed. This led to many nervous investors as well as a 22 percent increase in the stock’s short position. The delayed flight is obviously bad news, but Boeing isn’t going to take any chances. Boeing wants to make sure everything is perfect before the Dreamliner 787 takes flight once again. Any dip in the stock price based on negative news regarding the Dreamliner 787 might present an opportunity.

Boeing has a tremendous backlog for over 4,000 planes. Boeing also thinks China will need over 5,000 airplanes over the next 20 years. If this ends up being accurate, then it could lead to over $650 billion in revenue. Furthermore, Boeing expects EPS growth of 13.68 percent over the next five years. Production rates have increased, which indicates strong demand. Boeing saw a 29 percent increase in commercial aircraft deliveries last quarter. That’s impressive, and it’s not an aberration.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

The chart below compares fundamentals for Boeing, Lockheed Martin Corporation (NYSE:LMT), and General Dynamics Corp. (NYSE:GD). Boeing has a market cap of $64.18 billion, Lockheed Martin has a market cap of $30.47 billion, and General Dynamics has a market cap of $23.97 billion.

BA

LMT

GD

Trailing   P/E

16.64

11.35

N/A

Forward   P/E

11.75

10.45

9.51

Profit   Margin

4.77%

5.82%

-1.05%

ROE

81.53%

527.89%

-2.70%

Operating   Cash Flow

$7.51 Billion

$1.56 Billion

 $2.68 Billion

Dividend   Yield

2.30%

4.80%

3.20%

Short   Position

1.80%

3.60%

2.00%

 

Let’s take a look at some more important numbers prior to forming an opinion on this stock.

E = Equity to Debt Ratio Is Weak   

The debt-to-equity ratio for Boeing is weaker than the industry average of 0.70, and it’s weaker than the debt-to-equity ratio for General Dynamics. However, it’s much stronger than the debt-to-equity ratio for Lockheed Martin.

Debt-To-Equity

Cash

Long-Term Debt

BA

1.74

$13.50 Billion

$10.41 Billion

LMT

161.74

$1.90 Billion

$6.31 Billion

GD

0.34

$3.30 Billion

$3.91 Billion

 

T = Technicals Are Strong

Boeing has consistently outperformed its peers over the past year. However, Boeing comes in last place when it comes to yield (see chart in Catalyst section).

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

1 Month

Year-To-Date

1 Year

3 Year

BA

9.91%

13.44%

15.78%

25.10%

LMT

8.11%

4.66%

9.77%

29.37%

GD

-0.06%

-2.28%

-5.83%

-5.61%

 

At $84.88, Boeing is trading above all its averages.

50-Day   SMA

76.73

100-Day   SMA

76.57

200-Day   SMA

74.38

 

E = Earnings Are Steady          

Revenue growth has been very impressive over the past two years. Earnings suffered a slight setback in 2012, but this isn’t cause for concern. Boeing consistently delivers big profits.

2008

2009

2010

2011

2012

Revenue   ($)in   billions

60.91

68.28

64.31

68.74

81.70

Diluted   EPS ($)

3.67

1.84

4.45

5.34

5.11

 

When we look at the last quarter on a year-over-year basis, we see an increase in revenue and a decline in earnings.

12/2011

3/2012

6/2012

9/2012

12/2012

Revenue   ($)in   billions

19.56

19.38

20.00

20.01

22.30

Diluted   EPS ($)

1.85

1.22

1.27

1.35

1.27

 

Now let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Support the Industry

Passenger traffic has increased, which has led to increased demand. A slowdown in defense spending is likely, but Boeing isn’t overexposed in that area.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Conclusion

Boeing doesn’t quit at anything until it accomplishes its goal. That is also likely to be the case with the Dreamliner 787. Other positives include strong cash flow, excellent historical stock performance, very impressive top-line growth, an enormous backlog, and a decent 2.30 percent yield.

Boeing is an 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