Boeing’s (BA) strong run might not be completely finished, but in the weeks to come, shareholders are likely to start feeling the jet lag. BA’s silver bullet to ward off earnings threats from the federal budget wars has been its rock-solid commercial airplane unit, with sales and orders buoyed by innovative models like the 787 Dreamliner and great enthusiasm over the upcoming launches of the fuel-efficient 737 MAX and 777X.
But lately that bullet has started to show signs of tarnish: Persistent glitches with the company’s flagship Dreamliner, increasingly public criticisms by airline customers — and compensation demands for out-of-service aircraft — and even an admission from Commercial Airplanes Chief Randy Tinseth that the 787 needs to be more reliable.
Boeing’s biggest near-term hit besides losing the South Korea fighter jet deal? Rival Airbus snagged its first-ever order from Japan Airlines for 31 next-generation A350 jets — that ups the ante significantly in the all-important and high-growth Asian market. While Boeing pays a dividend, the 1.7% current yield is the slimmest among its major defense/aerospace peers. With all this turbulence and earnings on the horizon too, take profits in BA now.
Bottom Line: Expect greater volatility in all defense/aerospace stocks for the near term. At times like this, remember the sage words of Warren Buffett: “Be fearful when others are greedy and greedy when others are fearful.” And keep close tabs on your defense/aerospace holdings.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.