This has not been an easy year for Boeing (NYSE:BA). Not only was it dogged by safety issues related to its 787 Dreamliner, but the fiscal drama in Washington raised questions about the future of its defense business. Nonetheless, the Chicago-based has overcome these doubts and thrived.

The aerospace giant today reported better-than-expected quarterly earnings fueled by a 14% surge in deliveries. It also is speeding up production of the Dreamliner - which is attractive to airlines since it is 20% more fuel-efficient than more conventional aircrafts – and they’re also hurrying along the wide-body 777 and the single-aisle 737. The company also raised its earnings guidance for the year. Shares, not surprisingly, have hit a 52-week high.

Boeing’s results had plenty for investors to like. Free cash flow more than doubled to $2.3 billion and cash and marketable securities jumped 11% to $15.9 billion. Operating margins in Boeing’s commercial aviation unit rose to 11.6% from 9.5%. The company delivered 26 777s, up 30% from a year earlier. Its backlog is at a record $415 billion.

“Our overview of the business environment remains strongly positive,” said Chief Executive James McNerney during the company’s earnings conference call. “Airline customers continue to replace old aircraft in favor of new ones that offer compelling operating economics and increased fuel efficiency.”

Boeing expects to deliver between 635 to 645 aircraft, including about 60 787 Dreamliners, this year. Those estimates may prove to be conservative given the surge in demand for air travel. 

McNerney has managed the company through some challenging times, including the lengthy delays for Dreamliner, which cost the company billions. He hasn’t escaped unscathed. Japan Airlines, which received the second delivery of the Dreamliner, recently stunned Boeing by placing a huge order with Boeing’s rival Airbus.  

Shares of Boeing, which have surged more than 70% this year, had more room no run as Wall Street cheers the company’s better-than-expected quarterly results. Stern Agee has a $164 price target on the stock and Stifel Nicolaus’ estimate is $130 average estimate. That implies a potential upside of more than 20%. The shares are not cheap, trading at a price-to-earnings multiple of 22.4, under its 5-year high, according to Reuters. They also are more expensive than United Technologies (NYSE:UTX) (19) General Electric (NYSE:GE) (16) and Lockheed Martin (NYSE:LMT) (12).

Under McNerney, Boeing has sharply reduced costs by eliminating jobs and squeezing suppliers. Contractors that don’t play ball with Boeing are placed on “no-fly lists,” meaning that they won’t get new business from the aerospace giant. He certainly isn’t winning any popularity contests.

“I’m sounding like Darth Vader here,” McNerney was quoted by the Seattle Times as saying earlier this year.

The company’s defense business, the second largest behind Lockheed Martin, held up despite the uncertain fiscal environment. Operating margins rose to more than 9.25%. Revenue at Boeing Defense, Space and Security rose 3% to $8.05 billion. Profit, though, fell 19% to $673 million because the company is winding down production of its C-17 military transport aircraft. The business, though, captured more than $7 billion in new orders. Both Lockheed Martin and Northrop Grumman (NYSE:NOC), two of the biggest defense contractors, also reported better-than expected results.

The Bottom Line

Though no one can predict blue skies for Boeing, the company certainly has plenty going for it. This Blue Chip stock would be a good addition to investors’ portfolios. McNerney has defied the naysayers in the past and probably will do so again in the future.   

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  2. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  5. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  6. Professionals

    What to do During a Market Correction

    The market has what? Here's what you should consider rather than panicking.
  7. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  8. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  9. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  10. Stock Analysis

    The Safest Stocks You Can Invest in Right Now

    These stocks are likely to hold up better than others in a bear market, but there's a twist.
  1. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  2. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  3. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!