Commercial Airplane: Boeing - Case Study Example

Boeing - StockMarket The Company Engaged in the design, development, manufacture, sale, and support of commercial jetliners, Military aircraft, satellites, missile defense , human space flight and launch systems, and services world wide. It operates in five segments: Commercial Airplane (CA), Precision Engagement and Mobility Systems (PE&MS), Network and Space Systems (N&SS), Support Systems (SS), and Boeing Capital Corporation(BCC). The CA segment provides commercial jet aircrafts and related services primarily to the commercial airline industry. It also offers aviation support, aircraft modification, spares, training, maintenance documents, and technical advice to commercial customers. The PE&MS segment engages in the research, development, production, and modification of precision engagement, and mobility products and services. The N&SS segment engages in the research , development, production, and modification of products and services that assist in the transformation of operations to be network - centric, though integration , intelligence and surveillance systems, communications architecture and space exploration. The SS segment engages in operations maintenance, training upgrades, and logistical support functions for military platforms and operations. The BCC segment facilitates, arranges, structures and provides selective financing solutions in the commercial aircraft market, and the space and defense markets .This segment portfolio consists of financial leases, notes and other receivables, equipment under operating leases, and investments and assets held for sale or re-lease. Boeing also operates a high speed broad band communications business. It has a partnership with Lockheed martin Corporation. CEO : W. James Mcnerney Jr. Key Statistics Market Cap : 71.85 Billion U.S.D P/E : 17.80 EPS : 5.205 Div.Yield : 1.4 (1.5%) Profit Margin: 6.07% Operating Margin : 7.97% Return on Equity: 46.02% Revenue : 66.45 Billion U.S.D EBIDTA : 6.81Billion U.S.D Operating Cash Flow : 10.13 billion U.S.D Source: www.finance.yahoo.com Growth In 2007 Order backlog U.S.D 262 Billion (2006 : 213 Billion) Growth in backlog : 23% Growth in revenue : 8% Growth on EPS : 28% Growth in net income :27% Growth in earnings : 36% Source : www.seekingalpha.com Comparison Chart for Financial performance of Competitors, and industry average Raytheon Boeing Lockheed Northrop Industry Average Market cap 27.81 B 71.89B 45.60B 27.89B 27.98B Employees 71,351 154000 140000 122000 71,350 Qrtrly revenue Growth 8.5% 12.10% 15.50% 6.70% 12.20% Revenue 21.42 B 66.45 B 41.86 B 31.24 B 21.42 B EBIDTA 2.59 B 6.81 B 4.96 B 3.68 B 2.59 B Op.Margins 10.29% 7.97% 9.96% 9.51% 9.14% EPS 5.221 5.205 6.888 5.071 5.21 PE 12.41 17.82 16.11 16.26 17.90 Earnings History Dec 06 Mar 07 Jun 07 Sep 07 EPS estimates 0.98 1.02 1.16 1.24 EPS actuals 1.29 1.12 1.35 1.43 Difference 0.31 0.10 0.19 0.19 Surprise % 31.60% 9.80% 16.40% 15.30% Recommendation Trends Current Month Last Month 2 Months ago 3 Months ago Strong buy 6 6 7 7 Buy 5 5 4 4 Hold 11 11 10 9 Underperform 1 1 1 1 Sell 1 1 1 1 (Thomson/First Call) Source: www.finance.yahoo.com Our Analysis of Boeing Data Growth figures for 2007 are impressive. Operating margins for Boeing are lower than the competition. This is because Boeing is primarily into the highly competitive civil aviation sector, while its competitors are mostly in defense related products, where pricing is not that big an issue. The price earning ratio indicates that relative to the competition, Boeing has been valued at a higher price by the market. Overall, the industry P/E indicates that defense/aviation sector prices are still reasonable , and there is upside potential still remaining. Boeing is cash rich, indicating possible bonus shares in the future, and generous dividend payments. Boeing will be kept busy turning out the backlog of orders for the next 5 years. Therefore, growth in turnover, income and other parameters are assured. Boeing is profitable, and well managed. Our Recommendation: Strong Buy. What others have to say about Boeing Corporations' future "I am a buyer in this sell-off", 2007-11-23, www.seekingalpha.com I always look at absolutes. Growth rates are important, but when production capacities are tight and backlogs are high, absolute supply and demand is what matters. When a company is in a situation where demand for its product is high, and global supply is low, the cash flow will keep coming. So, in this volatile market, I am buying stocksBoeing's backlog 's worth approximately 263 Billion U.S.D. This demand is not just from the U.S. A large portion comes from international sources..In the industries I study, production capacities are fixed. Global demand is still not met. This means backorders continue to mount. And prices for these items will rise. Price increases and continued volume demand means more cash flow for some companies. In this environment, you must take a view and act. "12 defense and aerospace stocks for your portfolio", www.seekingalpha.com Boeing manufactures military aircraft, satellites, and defense systems. The stock has a P/E of 17.60, a PEG of 1.14, and a yield of 1.60%. " I like Nike", Jim cramer's mad money lightning round, 2007-11-28, www.seekingalpha.com ..Boeing has marked time here. The other guy (Airbus) can't even make the planes. Let's pick some BA, right here in the low $ 90's I think it goes up to $ 120. " War, war, what is it good for defense industry stocks, Erik Delith, www.seekingalpha.com, 26 jan,2007. .Out of the nearly 8700 companies currently in the Reuters .com stock universe, 70 are found in the aerospace and defense industry .Many of these companies have fared well thanks to the increase in government spending. Over the last five years, EPS in this industry is growing at an average annual rate of more than 31%.The earnings growth is also reflected in stock prices . The AMEX defense stock index was created in 2001 with a base value of 500. The index now stands at 1253. "Defense sector bests the S&P 500 for a seventh consecutive year", Scott Sachnoff, www.seekingalpha.com . The drivers in 2007 continue to be much of the same that we have seen in past years with performance gains attributed to five factors: Across the board increases in government spending. Rising defense budgets and homeland security Supplemental spending to cover the estimated 7Billion USD monthly cost of war in Afghanistan and Iraq. An ongoing rebound in the commercial aircraft business Continued expansion of the space and satellite market. Need we say more Read More