Is The Boeing Company (BA) Still a Buy?

The Boeing Company (NYSE:BA) is an American aerospace and defense corporation, and the company released its 4Q 2012 earnings on Jan. 30, 2013.

Boeing’s Earnings

Boeing reported 4Q 2012 earnings per share of $1.28, while analysts had estimated earnings per share of $1.19. Revenues were up 14% to $22.3 billion. However, during the same quarter last year Boeing earned $1.84 per share.

In 2012, Boeing delivered a total of 601 airplanes, the second most in commercial airline history. In the fourth quarter, the company delivered 165 commercial airplanes. Net new orders stood at a whopping 1,203 orders, while the company reported 1,000 orders for its 737 MAX. More than two-thirds of Boeing’s clients were outside the U.S, with All Nippon Airways being the biggest of them. During the last year, Boeing increased its 787 production from two airplanes a month to five per month. The company has a goal of enhancing this rate to seven in mid-2013 and 10 by the end of 2013. Moreover, the production for 737’s and 777’s will continue to grow in the coming years as the company expects to produce 38 aircrafts in the second quarter this year and 42 per month in the first half of 2014. Meanwhile, 777 production stood at a healthy 8.3 per month, while the new 737 MAX is all set to hit that market by 2017.

For defense, space and security, the U.S. remained a major market for Boeing, but the company has expanded into a lot in the international market as well. International customers for defense space and security systems contributed revenues of 24% and grew to 41% of the current backlog. The company expects its products to continue to do well in the coming years, especially in Brazil, Middle East, and Asia Pacific.

Valuation

Boeing is trading at a P/E of 10.64x and is yielding a dividend of 2.60% on its stock. Using an industry P/E of 10.13x, take a look at how you should value the company:

According to high estimates, we value Boeing at $78.20, which means it’s trading almost at fair value. Hence, it seems that it doesn’t have any significant upside potential at this moment.

Dreamliner’s Recent Issues

As a result of recent battery issues in the Dreamliner, it had been grounded in the U.S, Europe, and some parts of Asia Pacific. Boeing is currently working on the 787 battery changes in order to minimize fire risks on its Dreamliner. According to the Wall Street Journal, Dreamliner could be flying again sometime in March this year. Air investigators in the U.S. and Japan have announced that more time would be required in order to know the exact reason behind the Dreamliner’s battery incidents. As the U.S. National Transportation Safety Board (NTSB) said that it was “probably weeks away” from completing the probe. It’s the same in the case in Japan, where one of the regulators had this to say: “The investigation will continue as scheduled. Resuming flights in March……seems far too optimistic to me.”