So far this year, the shares of Boeing (NYSE:BA) have had a nice ride, up about 19%. This is roughly double the performance of the broader Dow Jones U.S. Aerospace & Defense Index ETF (NYSE: ITA) and its nearly 10% gains, and more than double the core Dow Jones index and its gain of less than 9% since January 1, 2001.
But can Boeing stock keep up the momentum? After all, the company has more competition and has suffered from delays. Besides, a slowing economy can certainly be a drag.
But despite all this, the long-term prospects for Boeing look promising. For example, Goldman Sachs (NYSE:GS) recently reiterated its “Buy” rating on the stock, which was based on encouraging news from the company’s Investor Day.
Why the enthusiasm? A big driver is the 787 Dreamliner. Consider that most of the flight tests are complete, which means Boeing can get started on generating a nice source of revenue. Many top customers – like All Nippon Airways, AMR (NYSE:AMR) and United Continental (NYSE:UAL) – are eager to get deliveries.
The fact is that the world has an aging fleet of aircraft. Thus, Boeing should benefit from a multi-year replacement cycle. There will also be strong demand in emerging economies like China, Brazil and India, as they continue to invest aggressively in their infrastructures.
Boeing estimates that there will be a worldwide total of 30,900 airplane deliveries by 2029. That’s a huge market opportunity.
Another key is that Boeing is a top innovator. Consider that the Dreamliner uses 20% less fuel than comparable-sized jets and travels at Mach 0.85. Other features include smooth wing technology, advanced composite use and next-generation propulsion systems.
No doubt, Boeing is likely to see a slowing of its defense business. Actually, about half its earnings come from this segment. But there will probably not be a substantial decline. In light of the continued geopolitical problems, it could be tough for Congress to get aggressive with cutbacks.
But even if there is a decline, the commercial business should more than make-up for this. If anything, the rollout of the Dreamer should be a big revenue-booster for years to come.
So for investors looking for a global operator — with a reliable earnings stream — Boeing is a good bet.
As of this writing, Hilary Kramer did not own a position in any of the stocks named here.
