Why Boeing Co (BA) Stock Won’t Lose Altitude Anytime Soon

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Boeing Co (NYSE:BA) shares have maintained their momentum, rising nearly 17% year-to-date, including 10% gains over the last month, despite the the fact that the aircraft major has begun the year with a relatively weak order total. But will Boeing stock crash-land once investors connect the dots?

Why Boeing Co (BA) Stock Won’t Lose Altitude Anytime Soon

BA booked 26 aircraft orders in January, while delivering 44. This compares to 29 orders in January 2016 and well short of the five-year average of 43 for January.

Why is the order inflow metric important? Obviously, Boeing, which has resorted to cost cutting in recent quarters to offset declining revenue, needs to sell more planes to boost profits. The company forecasted fiscal 2017 orders total would mirror its 2016, putting it at around 660 aircraft.

To that end, keeping track of BA’s order inflow gives investors a better sense of not only how the company will grow its earnings in the future or quarter to quarter, but also help Boeing stock investors gauge the the overall market environment for commercial aircraft. What’s more, last year BA delivered fewer aircraft (748) than in 2015. As for 2017, the company forecasts to deliver between 760 and 765, which would only put it in line with 2015 levels.

Why Boeing Stock Has More Going for It

That said, it would be a mistake to assess Boeing stock’s value solely based on one month’s order total. And that’s what BA stock investors have come to understand. The fact that President Donald Trump’s administration continues to tout increased defense spending should bode well for the aerospace and defense giant.

Moreover, Boeing has a number of contracts from the Pentagon. Most recently, BA secured a $983 million deal from the U.S. Air Force to provide engineering support services. The company also saw its Defense, Space & Security segment deliver strong revenues and margins during 2016. Likewise, Boeing stock still has a strong backlog of $473 billion with more than 5,700 commercial airplane orders it can rely on.

Looking ahead, the company expects 2017 core earnings, which exclude some pension and other costs, to be in the range of $9.10 to $9.30 per share on revenue of $90.5 billion to $92.5 billion. Plus, based in fiscal 2018 consensus estimates of $10.13, BA stock is priced at just 17 times earnings, which calls for year-over-year growth of 9%. And those estimates may yet be too conservative, given the company’s aggressive cost-cutting initiatives.

Bottom Line on BA Stock

You would be hard-pressed to find a hotter and more stable defense stock in the market today. And when factoring the company’s 3.12% annual dividend yield and its share buyback (Boeing bought back 55.1 million shares in 2016, spending $7 billion), the company’s attractive combination of income and value should keep BA stock flying high for much of 2017.

As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/boeing-co-ba-stock-wont-lose-altitude/.

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