Boeing’s All Dressed Up With Nowhere to Go
Tim is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It had to feel a little like getting all dressed up for the party, knowing you’re looking darn good, and then getting stood up. On a day Boeing (NYSE: BA) announced ridiculously good earnings, yet another monster plane order and record backlog, the stock is down. What’s a plane manufacturing company got to do to get some respect around here?
The Specs
By all accounts this was a whale of a quarter for the U.S. plane manufacturing leader. They outpaced Q4 of 2011 in virtually every meaningful way – earnings were up by almost 20%, revenue climbed 18% to $19.5 billion and they booked orders for 379 planes. Now that’s just plain impressive.
On the heels of this morning’s earnings call the company also announced the largest European jet order in their history. Norwegian Air Shuttle is replacing their entire fleet of planes and contracted with Boeing to fill 122 of their total order of 222 planes. Those other guys (Airbus) will provide NAS with the other 100. Though BA didn’t announce what their piece of the contract pie was monetarily, it should land somewhere in the $13 billion range, give or take.
The Concerns
Even with a 4% jump in defense-related revenue in Q4 investors and analysts simply can’t wrap their arms around continued growth in this area at a time when budgets are being cut. Today’s stock movement and the upside resistance seen by the likes of Lockheed Martin (NYSE: LMT), General Dynamics (NYSE: GD) and Northrup Grumman (NYSE: NOC) has been consistently frustrating. Even as LMT announces large plane orders and both GD and NOC trade below 10 times solid earnings, and all crank out a decent dividend they can’t seem to get past predictions of tough times.
Boeing’s delivery snafus didn’t help matters toward the end of last year, however CEO Jim McNerney did state the company’s “…intense focus on productivity…” for 2012. That stands to reason of course, and it will be interesting to see how well BA performs in this area as they continue to chase world leader Airbus.
Finally when Mr. McNerney announced his forecast for 2012 of $78 billion to $80 billion in revenues all was fine. However the $4.24 a share profit derived from the forecasted $78 billion or so wasn’t taken quite so well. Consensus profit estimates for 2012 were closer to $5 a share, a pretty big gap.
Though the concerns of analysts and investors are well documented and understood it’s still difficult to reconcile BA not trading around $80 a share. Even with concerns in the defense division, delivery and productivity issues and the market in general, Boeing has consistently outperformed expectations. With that said the reality is market sentiment is negative right now, justly or not. As a result BA will need to continue proving themselves before they return to their rightful place of $80 a share.
The investment opinions included are just that, opinions. Tim is not a licensed investment professional, nor has he been for several years. Investing involves risk, as you well know, so consider your decisions wisely.
