(BA) Boeing Richer with New Orders

The Boeing Company (BA) received two orders for its 747-8 Intercontinental aircraft from undisclosed customers worth $5.4 billion. The transactions involve a total of 17 aircraft, taking the order backlog for the aircraft series to 50.

The 747-8 Intercontinental has a capacity of 467 passengers across three classes and boasts improved fuel efficiency and lower emissions. The 747-8 competes with the A-380 of its international commercial airspace rival Airbus, part of European aerospace giant EADS NV.

Boeing is pinning its hopes on the 747-8 airplane to boost its Commercial Airplanes segment. In fiscal 2010, segmental revenue dropped 6% to $31.8 billion compared with 2009. A major reason for the drop was no deliveries from the 747 program due to the internal transition from the 747-400 to the 747-8.

The company, however, expects the wheels to turn for the better. Per the company the global market for commercial airplanes in the next 20 years would be approximately $4 trillion.

Boeing expects traffic to grow at 5.1% annually over the long term and the world airplane fleet to double by 2030. The single-aisle market is expected to see strong demand around the world and consequently an increase in its market share. World commercial airliner fleet composition is expected to change significantly by 2030 with single-aisle jets making up 70% of the total fleet size versus 62% currently.

Boeing’s multi-trillion dollar outlook is fueled by robust growth in China, India and other emerging markets. China, which has experienced double-digit growth in gross domestic product in recent years, is forecasted to grow at 7% per annum; while South Asia, which includes India, is forecasted to grow at 7.1%.

We believe, Boeing is among the best-positioned companies in its sector due to its balanced exposure to commercial aircraft and defense equipment. Furthermore, the company is well positioned to benefit from the gradual recovery of the global economy and improving freight and passenger traffic. However, we believe the above positives are already priced in the current valuation, leaving very little room for any upside in the near-term.

The major competitors of the company are General Dynamics Corporation (GD), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC). We maintain our Neutral rating on the Zacks #3 Rank (Hold) stock.

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