Is Boeing a Good Portfolio Play?

With shares of Boeing (NYSE:BA) trading around $139, 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.

A Boeing 787 Dreamliner undergoing maintenance in Tokyo emitted smoke that may have come from one of the jet’s batteries, the units that were redesigned last year after two meltdowns triggered a global grounding. The cause is under investigation, and Japan Airlines Co. will share details with Japan’s transportation ministry and Boeing, said Seiji Takaramoto, a spokesman for the Tokyo-based carrier. The jet was being prepared for a flight to Bangkok, and another 787 was put in service for that trip, he said. A safety valve on one of eight battery cells was found to have opened and dispersed liquid inside the plane’s main battery container yesterday at Narita airport, Takaramoto said. The other seven cells were intact.

T = Technicals on the Stock Chart Are Mixed

Boeing stock has been surging higher in recent quarters. However, the stock is currently pulling back and 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 signals 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

24.47%

46%

43%

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

Put IV Skew

Call IV Skew

February Options

Flat

Average

March Options

Flat

Average

As of Tuesday, there is 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 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 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%

1.27%

Boeing has seen rising earnings and 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), and Northrop Grumman (NYSE:NOC) — and sector?

Boeing

Lockheed Martin

Spirit Aerosystems

Northrop Grumman

Sector

Year-to-Date Return

1.9%

1.27%

1.26%

1.64%

2.51%

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’s 787 Dreamliner undergoing maintenance in Tokyo emitted smoke that may have come from one of the jet’s batteries. The stock has been surging higher but is currently pulling back. Over the last four quarters, earnings and revenue figures have increased. However, investors have had conflicting feelings about recent earnings announcements. Relative to its peers and sector, Boeing has been a year-to-date performance leader. Look for Boeing to continue to OUTPERFORM.

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