Can Boeing Stock Get Passed a Government Shutdown?

With shares of Boeing (NYSE:BA) trading around $119, 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 may have to furlough employees if the government shutdown persists through the week. Bloomberg reports that the furloughs would occur at Boeing’s defense, space, and security unit. A Boeing spokesman outlined several events that could cause workforce reductions, including stop-work orders from Boeing’s partners, a shortage of government inspectors, funding cuts, or reduced access to federal buildings where employees work.

T = Technicals on the Stock Chart Are Strong

Boeing stock has been surging to the upside in recent years. The stock is currently consolidating near all time high prices but looks poised to head 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

29.93%

83%

80%

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 been conflicted 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

57.87%

37.79%

44.43%

46.11%

45.56%

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. If the current government shutdown persists, Boeing may be forced to furlough some employees. The stock has been moving higher in recent years and is now consolidating near all time high prices. Over the last four quarters, earnings have been mixed while revenues have been rising, which has produced conflicting feelings among investors about earnings announcements. 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.