After another incident which raised questions regarding the safety of the company’s Dreamliner 787, however The Boeing Company (NYSE:BA) shares have seen some turbulence in recent trading sessions. Should investors take this opportunity to take profits? Or is there still room for Boeing’s ride higher to continue?
Boeing, we have a problem
On Friday, July 12, investors were likely rattled when it became known that a The Boeing Company (NYSE:BA) Dreamliner 787 had caught fire at London’s Heathrow Airport.
Boeing shares fell hard on the news, serving as Friday’s biggest laggard among the Dow Jones Industrial Average. But the market proved once again it tends to have a short memory, as The Boeing Company (NYSE:BA) retraced much of its decline when trading resumed Monday.
Investors were likely relieved when investigations revealed the plane’s batteries were not the cause of the fire. As of now, the market seems to be betting this is all ado about nothing, and I’d have to agree. Boeing emerged unscathed from its previous incident regarding the safety of its planes.
The safety of the jet was first called into question after several reported problems, including when an electrical fire broke out in an empty Japan Airlines 787 Dreamliner in January.
After the Dreamliner’s problems surfaced, The Boeing Company (NYSE:BA)’s stock price experienced only a slight blip in what has otherwise been an impressive run over the past few years. Shares made up losses in the aftermath of the initial Dreamliner issues, and then some.
That’s because despite the headlines, Boeing is a hugely successful, growing firm. The company racked up 19% revenue growth last year and 8% growth in earnings from operations.
Not the only bird in the sky
The Boeing Company (NYSE:BA) recovered from previous concerns regarding the safety of its planes, and will likely do so again. That being said, for investors who’d rather not wait for the storm clouds to pass, aerospace industry peer United Technologies Corporation (NYSE:UTX) trades similarly to Boeing without the headline risk.
The company’s Pratt & Whitney subsidiary makes aircraft engines for commercial, military, business jet, and general aviation markets, as well as provides fleet management services for commercial engines, and represents the company’s largest segment by unit sales. Furthermore, United Technologies Corporation (NYSE:UTX) operates its UTC Aerospace Systems segment, which supplies electric power generation, management and distribution systems, as well as flight control systems to the aerospace industry.
Fellow diversified industrial General Electric Company (NYSE:GE) also has a large aviation business. GE is almost four times as large as The Boeing Company (NYSE:BA) by market capitalization, but isn’t operating nearly as well as its smaller peer. Total revenue was essentially flat in 2012 versus the prior year, and diluted earnings per share increased only 4.8%.
United Technologies Corporation (NYSE:UTX) performed decently in 2012, but didn’t shoot the lights out. Sales increased 4% year over year, but earnings per share were essentially flat from the prior year.
General Electric Company (NYSE:GE), meanwhile, has a balance sheet that should give all investors pause. GE has a whopping $234 billion in long-term debt, $223 billion of which is concentrated in the company’s massive financial services unit, known as GE Capital.
General Electric Company (NYSE:GE) is a massively profitable business, but this huge level of debt should have investors concerned. The company has twice as much long-term debt as shareholder equity.
Put simply, Boeing is growing faster than its peers, and is reasonably capitalized. It has a massive business that will continue to grow in spite of recent issues. Investors should continue to hold their The Boeing Company (NYSE:BA) shares, and consider adding the stock on any significant pullback.
Robert Ciura has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company (NYSE:GE).
The article Here We Go Again: Headline Risk Returns For This Aerospace Giant originally appeared on Fool.com.
Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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