Thoughts on Boeing (BA)

BA at PE of 11 and down 40% from the high. Talk about a major blue-chip for sale.

It looks like this stock has been beaten up in a major way and a buying oppertunity has been created.
Could you tell me more about Boeing's defence products? I'm not aware of too many of those and agree there will be a big turn around in demand for military aircraft.
The Russian war with Georgia was considered a Russian success but this is not true.
Russia lost 6 fighter planes to an ridiculousy primitive army. It also lost a lot of tanks. If anyone thought this war was proof of russian might - think again.. this war proved Russia's army needs a serious overhaul.
If this is the damage an army of pesants inflicted on Russia, can you imagine what NATO could do to them?

Hey there Tuna...

Look at this link

http://www.boeing.com/ids/index.html

It is the integrated defense systems portion of the BA website. They are involved in airlift, airborne survelance/command and control, tactical and strategic strike aircraft, the much in the news tanker program, rotary wing (apache, chinook, osprey), and they are very big in UAV's (unmanned aerial vehicles). Plus, they are involoved in a bunch of cuting edge research that will be used for decades to come...see this article on the use of polymers to build strong but light weight aircraft.

If you are interested in UAV's...which are rapidly becoming ubiquitous on the modern battlefield...see AVAV and Elbit systems ESLT

Worms May Hold Secret To Lighter Aircraft
Friday 08/15/2008 4:54 PM ET - Dow Jones News

As of 10:52 AM ET 8/22/08
By Christopher Hinton

In the rock pools along the North Atlantic lives a worm that may hold a clue for aerospace engineers looking for stronger, lighter materials to build aircraft that can fly greater distances and burn less fuel.
The ragworm, also called a clamworm or Nereis virens by the scientists who study it, has a unique set of pincers that it uses to tear apart food and fight off predators. Fascinating to researchers is that the pincers have a high concentration of zinc, which is usually deadly to organisms in large amounts.
Ragworms' pincers and jaws are also rich with histidine, an amino acid found in certain proteins. Together, the zinc and the histidine form an incredibly strong composite with a hardness comparable to that of aluminum or titanium alloys, but at only half the weight by volume. "If you use only polymers that are presently available, you can't approach the stiffness or the hardness that's available in the jaws," said Herbert Waite, a biochemist and professor at UCLA Santa Barbara, and one of the researchers.
Such characteristics have garnered interest in the aerospace field, where stronger and lighter materials have helped to boost a plane's flying distance and cut its fuel consumption. Boeing Co.'s (BA) latest wide-body plane, the 787 Dreamliner, is built with advanced carbon-fiber polymers in its wings and fuselage that will help cut fuel consumption by 20%.
If researchers can figure out how to fabricate the worms' material on a large scale, it could be used in future aircraft to help boost distance and fuel efficiency even further.
NASA has shown particular interest in the scientists' work; Waite said he has been asked to speak at Ashland Inc. (ASH) and Hughes Research Laboratories LLC, a think tank operated by Boeing and General Motors Corp. (GM)
How long it will take before the material can reach production stage is difficult to tell. "Everyone is impatient to get to the final project, but I'm arguing the more you understand how biology creates, the better you can create a mimic in industrial applications," Waite added.
A full article on the research results was published this year in Biomacromolecules.
-By Christopher Hinton; 415-439-6400; AskNewswires@dowjones.com

what an amazing peace of research.. who would have imagined.
Just a thought though, gentlemen:
It seems to me like passenger airliners are Boeing's big business and the way those companies are looking, doesn't that mean a reasonable fear of orders for new aircraft dropping in a big way?
I'm not sure Boeing should be analyzed Solly from a chart perspective, we know enough about it's business environment to consider real threats to the business.

You certainly have a point there, guliamo. Just yesterday there was an article about how the airline slowdown is hitting the Far Eastern carriers...previously thought to be immune. The question is...is that already priced into a $107 to $65 drop.

I guess if the answer were obvious everyone would be either buying or selling...so, the market, with everyone doing their analysis and coming to their own conclusion...will decide. Ain't capitalsim grand!

they are about to lose the air force tanker contract to Airbus/EADS worth a pretty penny. I'm personally for their loss on this one...EADS is planning on building the tankers in my hometown. otherwise I like this company

I sold my position in BA given the dire conditions of the airline industry and an alleged safety risk with the lightweight materials used in its Dreamliner. A lot of its future growth depends on the successful delivery of the Dreamliner. I became aware of the safety concern after I saw Dan Rather's reporting. I thought that this safety concern would further delay the lauch of the Dreamliner. But I now believe that the safety concern is now overblown (see http://news.​cnet.com/8301​-13512_3-9786​962-23.html).

I'm considering buying BA again for my account because BA at $65.50 offers an attractive risk reward ratio based on a cash-flow discounted model. And I predict there'll be a long-term secular demand for more fuel-efficient aircraft especially from the Middle East and Far East countries, in addition to replacement demand from the developed countries.

I would not believe anything Dan Rather says...even if he said it would be cold in Buffalo in January.

I have been tracking Boeing a long time. They have a very robust defense business, as indicated above on this thread. Since I work for Lockheed Martin, I have a pretty good handle on their defense business. . .plus we compete with Boeing all the time on all sorts of Department of Defense, Department of Homeland Security, and other Government contracts.

If you were to value just Boeing's Defense business with revenues of $32B as if that were the entire company and apply Lockheed Martin's valuation, you would come up with a market cap around $36.5B or $36.6B. Boeing’s actual market cap is $47.65B. I think it's a reasonable assumption to assume that BA's defense business should be valued around what LM's is. If you believe that, then the rest of the company's market cap, 11.05B, would apply to commercial airplanes and Boeing Capital. The revenues of those two units combined is about $34.2B. So, in effect, the BA stock price today assumes a multiple of only 0.32 on the commercial airplanes and Capital Revenue. Boeing's current P/E of 11.8 is just about where it was following 9/11 (when it was around 11.5), when the commercial airplane market looked even worse. Wow, that's cheap. So, you buy BA stock, you get the airplanes segment and capital segment for free, a fairly valued defense company, and a 2.49% yield dividend.

But, why is the company on sale? Well, they have had serious ethical issues in the past several years. The original tanker deal got their CFO arrested (Michael Sears), the Air Force Procurement official arrested (Darleen Druyun), and the CEO (Phil Condit) resigned. The interim CEO (Harry Stonecipher) then had an affair with another BA executive and had to resign. One of their people stole some intellectual property from Lockheed, getting them barred from their space vehicle launch business. The Dreamliner is having major supply chain issues and the tanker deal is back, but Boeing will likely not get the contract. (As an aside, Boeing and Airbus compete all over the world on tankers and Airbus always wins). Add to all of this, the recession and the belief that the airplane order will dry up. As I point out above, the market thinks that the airplane segment is near worthless.

So, you have to decide whether BA overcomes these issues and recovers, selling Dreamliners like hotcakes, leveraging the technology into a next generation 737 to take share from the Airbus A320, and continues to sell defense products and services to the US Government and foreign allies. Or, does the Dreamliner fail, does the F-35 steal the US Navy market from the F-18, and Boeing continues to make defense products and commercial airplanes, but as a second fiddle to Airbus and Lockheed Martin respectively.

My feeling is that the upside potential far outweighs the downside risks.

I would like just to comment on one of the comments above related to Georgia's performance against Russian's military. Yes, the Russians did loose some aircraft. This fast underscores the need for next generation aircraft like the F-22 and F-35. Even poorly funded militaries can afford advanced anti-aircraft weapons that can kill advaned fighters like the MIG-29 and Su-27.