On Feb 6, 2015, shares of The Boeing Company (BA) soared to a new 52-week high of $148.89, finally ending the trading session a tad lower at $148.00. This aerospace and defense prime, with a market cap of around $104.6 billion, has seen its shares surge roughly 13.85% so far this year, outperforming the 0.17% decline of the S&P 500 over the same period.
What's Driving Boeing Up?
Last month, Boeing delivered stellar fourth-quarter 2014 results on booming commercial deliveries. It reported forecast-beating earnings in the fourth quarter that also rose an impressive 22.9% year over year. The company expects to deliver between 750 and 755 commercial jetliners in 2015, a target that could put it on course to beat its European rival Airbus Group NV for the fourth consecutive year.
However, Boeing’s statement that manufacturing costs for its advanced 787 Dreamliner will likely increase faster than expected is a cause of concern. It expects to post core earnings, excluding the part of pension expenses driven by market volatility, of $8.20 to $8.40 per share for 2015, compared with $8.60 per share reported in 2014. Boeing shares had lost 2.5% in 2014.
That said, Boeing reigns in the commercial skies as this North American jet plane maker has surpassed its European rival Airbus in 2014 for the third consecutive year. The fact remains that Boeing is flying high on the back of rising demand for its fuel-efficient commercial planes. Boeing once again reported industry record deliveries in 2014, retaining its position as the world’s biggest airplane maker, beating its own projection.
In the defense arena, the Republican win in the mid-term election, Middle East tensions, and the Obama administration’s major realignment supported by a rising U.S. economy may turn out to be a catalyst for Boeing as well as other majors like Lockheed Martin Corp. (LMT), Northrop Grumman Corp. (NOC) and Raytheon Co. (RTN). Moreover, the fiscal 2016 budget request includes funding to purchase Boeing’s 16 P-8 aircraft ($3.4 billion) and the development of the KC-46 tanker ($3.0 billion) as well.
Recently, Boeing made some investor-friendly moves, increasing its quarterly dividend and boosting its stock buyback plan, all of which underlying its strong operational performance. The company’s board authorized the repurchase of $12 billion of its shares over the next two to three years and raised its quarterly dividend by 25%.
The expected long-term earnings growth rate for the company is set at 11.93%.
Zacks Rank
Boeing currently holds a Zacks Rank #3 (Hold).
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