Will Recent News Boost Boeing’s Stock?

With shares of Boeing (NYSE:BA) trading around $138, 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 secured orders for $95 billion worth of its 777X jets, which were debuted at the Dubai Airshow. The record-breaking sum is the largest product launch by dollar value in commercial plane history and represents orders for 259 units from four different airlines. Boeing received orders for the new craft from Emirates, Lufthansa, Qatar Airways, and Etihad Airways. The New York Times reported that the orders show how airlines in the Middle East and Asia are quickly growing and spending money on new aircraft. In addition, Boeing is considering sites outside Washington state for the production of the new craft, as the machinists union in Washington rejected Boeing’s contract offer.

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

22.94%

10%

8%

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

December Options

Flat

Average

January 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?

2013 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

11.85%

11.02%

18.03%

-30.91%

Revenue Growth (Y-O-Y)

10.61%

9.05%

-2.53%

14.05%

Earnings Reaction

5.33%

-0.77%

3.00%

1.27%

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 = 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

83.80%

50.02%

90.16%

64.22%

73.05%

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. The company has secured orders for $95 billion worth of its 777X jets. The stock has been surging higher and is now trading near all time high prices. Over the last four quarters, earnings and revenue figures have increased, leaving investors happy. Relative to its peers and sector, Boeing has been a year-to-date performance leader. Look for Boeing to OUTPERFORM.

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