Boeing Still a Good Investment, but Not Now
By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets
In one of our previous articles, we spoke about the rising demand of pilots and air transportation, which made us focus on relevant companies. Another important aspect here is aircraft, without which no air transportation is possible. So today, we’ll analyze one of the largest aircraft manufacturers out there, Boeing.
Boeing Company (NYSE: BA) is a leading aircraft, military and space equipment manufacturer. Headquartered in Chicago, IL, the company mostly operates in Seattle, WA. Boeing is among the top three military equipment companies in the US by the yearly order volume. Around 50% of the company’s budget accounts for military orders.
Over the last four years, Boeing’s yearly revenue is always somewhere near $90B, while the net profit is steadily growing.
Since 2014, the company’s equity was going down, with the debt growing at the same time, and thus the debt-equity ratio is currently not the best one.
Despite the debt, however, the investors get the dividends regularly, and those have been growing speedily since 2014: from $1.94 per share that year to $6.50 in 2018. Meanwhile, the growing demand led to Boeing supplying 763 aircraft in 2017. This was a record high, and the earnings went up from $4.985B to $8.197. The price per share also rose by over 100%, breaking out $300. In 2018, the company is going to supply 912 aircraft, or 20% more.
Recently, Boeing got a contract for $62.7M which included maintenance and modification of F/A-18 и EA-18G. The contract is expected to be fulfilled by Sep 2019.
Another contract won by Boeing is worth $805M and includes developing, manufacturing, testing, and supplying for pilotless aircraft to the US Air Force by 2024.
The US Air Force also has yet another contract with Boeing, which is worth $9.20B and includes both aircraft and flight simulators. At the first stage, the company will get $813M to supply 351 Advanced Pilot Training aircraft and 46 simulators. The overall deadline is 2034.
This is just to name a few, and still one could clearly understand Boeing has orders for at least the next 10 years.
Boeing is also a significant player in the international military business; with the emerging countries increasing their budgets in the light of global geopolitical uncertainty, the company is sure to get more orders.
Apart from military aircraft, Boeing is planning to launch an air taxi prototype next year, which would carry passengers for short distances, while the company is also determined to create an air transport management system within 5 years.
All this makes the outlook perfect, with both dividends and share prices growing steadily. Technically, however, there is some extreme volatility, which shows investors are uncertain; some are closing their positions to lock in over 100% profit, others are, conversely, buying. This led to the price forming a wide range between $315 and $370. At this rate, it may well reach $400 and then bounce back to $300.
In 2016, Boeing shares started rising from $100, with the volumes growing, and reached the high at $350, i.e. those who bought at $100, started selling at $350. This means one should better wait for higher volumes and lower prices, as well as some good news, before buying, rather than going long straight away.
Alphabet Inc (NASDAQ: GOOG) experienced a similar situation, when the price was between $1,000 and $1,200, and then, when good earning reports came out, it reached $1,270. Then, Google shares went down again, and are now trading at $1,150, while being fundamentally very strong. So, it may start rising again soon, but at lower levels.
You remember an old saying ‘Buy rumors, sell facts’, of course. This is true with Boeing as well. The news on the company plans must be already priced into the shares, so before adding Boeing to your portfolio, you’d better wait for some lower prices.
Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.