With shares of The Boeing Company (NYSE:BA) trading at around $91.18, 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
Boeing has been given an OUTPERFORM rating here since December, but has the stock been too hot? Let's take a look at some positives and negatives first. Then we'll get to some important numbers followed by a detailed conclusion.
Positives:
Highly innovative company Increased productivity Strong cash flow 2.10 percent yield (lower than peers) Increased deliveries for 737 and 777 Decreased R&D expenses FY2013 revenue expected to come in between $82 billion and $85 billion 787 given the green light by FAA Analysts love the stock: 19 Buy, 4 Hold, 1 SellNegatives:
Decline in earnings in 2012 Decreased deliveries for 787 Unimpressive performance by Boeing Capital Didn't hold up as well as peers in 2008Now let's take a look at some comparative numbers. The chart below compares fundamentals for Boeing, General Dynamics Corp. (NYSE:GD), and Lockheed Martin Corporation (NYSE:LMT). Boeing has a market cap of $69.42 billion, General Dynamics has a market cap of $26.20 billion, and Lockheed Martin has a market cap of $31.78 billion.
| BA | GD | LMT | |
| Trailing P/E | 17.17 | N/A | 11.54 |
| Forward P/E | 12.85 | 10.52 | 11.08 |
| Profit Margin | 5.03% | -1.04% | 6.04% |
| ROE | 64.43% | -2.56% | 302.40% |
| Operating Cash Flow | $7.20 Billion | $2.77 Billion | $3.19 Billion |
| Dividend Yield | 2.10% | 3.10% | 4.60% |
| Short Position | 1.30% | 1.60% | 3.20% |
Let's take a look at some more important numbers prior to forming an opinion on this stock.
E = Equity to Debt Ratio Is Normal
The debt-to-equity ratio for Boeing is weaker than the industry average of 0.74. However, this isn't a poor debt-to-equity compared to peers, and Boeing would have no problem improving its debt situation if necessary.
| Debt-To-Equity | Cash | Long-Term Debt | |
| BA | 1.21 | $11.81 Billion | $9.17 Billion |
| GD | 0.34 | $3.74 Billion | $3.91 Billion |
| LMT | 20.74 | $3.06 Billion | $6.30 Billion |
T = Technicals Are Strong
Boeing has outperformed its peers for every time frame listed below.
| 1 Month | Year-To-Date | 1 Year | 3 Year | |
| BA | 6.23% | 21.80% | 21.68% | 35.35% |
| GD | 5.46% | 7.35% | 12.71% | 5.23% |
| LMT | 2.93% | 9.09% | 15.19% | 33.23% |
At $91.18, Boeing is trading above all its averages.
| 50-Day SMA | 84.44 |
| 100-Day SMA | 79.94 |
| 200-Day SMA | 76.10 |
E = Earnings Have Steady
Earnings declined in 2012, but Boeing always delivers impressive profits. Boeing even delivered profits in 2008 and 2009, which wasn't an easy feat for most companies throughout the broader market. Revenue has improved for two consecutive years.
| 2008 | 2009 | 2010 | 2011 | 2012 | |
| Revenue ($)in billions | 60.91 | 68.28 | 64.31 | 68.74 | 81.70 |
| Diluted EPS ($) | 3.67 | 1.84 | 4.45 | 5.34 | 5.11 |
When we look at the last quarter on a year-over-year basis, we see a decline in revenue and an increase in earnings.
| 3/2012 | 6/2012 | 9/2012 | 12/2012 | 3/2013 | |
| Revenue ($)in billions | 19.38 | 20.00 | 20.01 | 22.30 | 18.89 |
| Diluted EPS ($) | 1.22 | 1.27 | 1.35 | 1.29 | 1.44 |
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 Might Support the Industry
Defense spending is a concern, and the Industrial sector doesn't perform well during weak economic times. However, as far as Boeing is concerned, the demand for its products and services remains strong.
Conclusion
Boeing will likely get hurt if we see a steep market correction. Unlike most blue chips that have performed well for decades, Boeing has had several lengthy clips of poor performance. However, this has always turned out to be an incredible buying opportunity. The year 2008 was the stock's biggest hit, but those losses have been recouped. Whoever had the guts to double down (or simply buy) at that time is feeling wise and wealthy right now. If this type of environment were to present itself again and the stock nosedived, there would be absolutely zero concerns of the company going under. To even think that as a possibility is absurd. Therefore, whoever is willing to buy at lower levels is highly likely to be rewarded at some point down the road. The good news is that Boeing is better situated than it was in 2008. And we don't even know if the market will ever come back down to reality. If the market doesn't come back down to reality and it keeps trading higher, then Boeing is an easy winner.
No comments:
Post a Comment