Boeing (BA): High tech, high value

Posted Jan 31st 2008 1:50PM by Steven Halpern
Filed under: International Markets, Newsletters, Boeing Co (BA), Stocks to Buy, Technology

"It's not so easy building an airplane; harder still to develop a new one from scratch and then build it in various pieces around the world to be shipped to one place for final assembly," notes technology expert Mark Mowrey.

The editor of The Prudent Speculator Tech Value Report explains, "No surprise, then, that this month's new buy, aerospace giant The Boeing Company (NYSE: BA), has fallen behind schedule on the 787 Dreamliner." Here is his bullish review.

"Delays aside, the plane remains the most elegant, sophisticated and efficient carrier-class planes in the world, one for which we bet customers are willing to wait.

"We believe the company will move beyond pre-launch troubles this year and continue to innovate along the gamut of its aerospace endeavors, and find the stock's valuation a compelling entry point.

"In addition to a just-identified 3-unit addendum to an existing order for six Dreamliners from Fiji-based Air Pacific, Boeing has racked up orders for 817 of the 787s from 55 different carriers around the globe.

"The airlines were attracted to the advantages the Dreamliner's nearly half composite (instead of a similarly strong, though heavier aluminum and titanium) structure which should utilize 20% less fuel for a given load and range.

"The launch could have come even earlier. Initial delivery of the new plane has been delayed six months as a result of Boeing's inability to fully coordinate an around-the-world production line that included 43 suppliers in 135 different sites.

"That the company's other lines of aerospace work are resurging should help it weather a potential slowdown in passenger aircraft orders. Facing a faltering U.S. economy, domestic carriers may extend the life of existing fleets, delaying orders longer than many investors now expect.

"More worrisome is the potential that weakness here might spread to other parts of the globe, including many of the centers of growth that drove higher orders for new planes in 2007.

"Yet, we're heartened by Boeing's current order backlog, which totals $224 billion in Commercial Airplanes (seven times the segment's 2006 revenue) and about $70 billion in IDS. And we doubt that even with another delay would a worrisome portion of 787 orders shift to competitor Airbus.

"We don't believe we're paying too much for that backlog, even discounted a bit for additional setbacks. Trading at 17 times trailing earnings and less than 14 times the current $5.99 average estimate for 2008 EPS now showing on Reuters Estimates, while yielding a modestly generous 2%, the shares sit at the edge of our buy list as one of the few opportunities we currently see in the aerospace and defense realm."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

Tags: 787, aerospace stocks, airbus, aircraft stocks, airplane stocks, ba, boeing, dreamliner, mark mowrey, prudent speculator, tech value report