Opinions
Larry Berman CFA, CMT, CTA
Boeing
BA-N
HOLD
Jul 07, 2014
Stock price when the opinion was issued
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The CFO recently made comments: the troubled 737 is closer to resuming production, as the 787 could increase production later this year. Really, the 737 is more important. Also, their ailing defence business is starting to stabilize and recover, though their commercial business could improve. Maybe cash flow will improve; there are signs it is already. They won't be hit by tariffs, because 80-90% of their supply chain is in the US. They have a half-trillion-dollar backlog Last Friday, the US Air Force awarded Boeing the contract for fighter jets. He'd like to see a few good quarters of stronger results, and it's early in this turnaround though it's getting its act together. Also, Boeing enjoys little competition and airplane demand is strong.
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He hopes their troubles are behind them but as an equity investor is not sure if he sees the light at the end of the tunnel yet. There are only three companies in the world that make planes and global travel is growing. It has some logistics issues and has received some significant slaps on the wrist by the transportation board. There is a lot of debt but the order book is pretty filled up. He thinks there has been some change in management.
Over the last year we are seeing some distribution coming in. The highs this year are going to be tough to take out. In the next year or two they will come back to test it. It is a $120 to $140 trading range. If it goes below $120 it could go to $80. Internally the stock is starting to weaken relative to major stock indices. Tighten up stops.