Boeing Co (NYSE:BA) — Boeing is the world’s largest manufacturer of commercial jets and the second-largest maker of military weapons. Long-term government contracts and a solid cash position, as well as a solid backlog of business, encouraged Standard & Poor’s to maintain a four-star buy rating on the stock.
S&P projects earnings of $7.42 this year, down from $7.44 in 2015. Orders from the new administration to replace an aging fleet of military aircraft, including the KC46 tanker, or a newer version of that aircraft, and backlogs of civilian orders for 737’s and 787’s remain high and could enable Boeing to return to a historically high stream of revenues. S&P has a target price of $172 following third-quarter earnings-per-share of $3.51, which beat their $2.25 estimate on stronger revenues than projected.
Diluted public shares, due to an aggressive share buyback program, also contributed to the recent EPS increase. EPS of $9.56 is projected for 2017.
Boeing, like many blue chips, has spent most of 2016 in a rectangle (bullish consolidation pattern). The stock broke from that pattern when better-than-expected Q3 earnings were announced on Oct. 26. The breakout ran into resistance at about $145, pulled back to $140, and on yesterday’s election news jumped to a $145 close.
Buy a partial position in BA at $145 and a full position at $140 with a target of $175, rendering a return of 25%-plus within six months. BA pays a dividend of $4.36 per share for a dividend yield around 3%.