Opinions
David Baskin
Boeing
BA-N
COMMENT
Oct 03, 2017
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.
$100 billion in sales. Has an order backlog for about 3000 737 jets. Air travel is growing globally, particularly in Asia and this company has a tremendous capability, although China is starting to manufacture its own jets. Traditionally, it has not been a well-managed company. They have quite aggressive unions. However, the more research he does, the more he thinks travel and mass market tourism are going to be growth industries going forward, and he has to find ways to participate.