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I was at work here at the office last Monday night when I heard about the Boeing 737 crash at New York's LaGuardia Airport. A nose wheel on the jetliner had apparently given way after a hard touchdown just after 5:30 p.m. (EDT), leading to a crash that injured about eight of the 150 folks on board
"Uh-oh," I thought to myself. "Here comes another feeding frenzy."
You're an exceptionally sharp group of folks, so you know what I'm getting at here.
In the last couple of weeks, we've had a fire in one of Boeing's new 787 Dreamliners while it was parked at a gate at Britain's Heathrow Airport. Then there was the early July crash of Asiana Flight 214, which involved a Boeing 777 aircraft.
This nose wheel debacle would seem to have created a "trifecta of tragedy" involving the maker of all three of these jetliners. And that's led to a real effort by some journalists in the mainstream media to weave this into a tapestry that underscores the "continuing woes" of The Boeing Co. (NYSE: BA).
Don't be fooled.
There's that old cautionary aphorism that warns how "appearances can be deceiving." In this case, I believe they are.
I don't want that deception to juke you out of an intriguing long-term investment opportunity. If anything, you should be looking for an opportunity to buy.
Trust me on this … with Boeing, I know what I'm saying.
I recommended the airliner giant in late September 2011.
The stock did well – very well, in fact.
Then came the Dreamliner battery crisis in the first part of January.
Interestingly, I received a surprising amount of blowback on my call to buy into the weakness. Some said I was underestimating the severity of this problem, while others said I was making light of a safety issue (something this former journalist would never do … trust me on that).
The bottom line, however, is that Boeing is up 72% since that initial recommendation (77% including dividends) and 43% since the Dreamliner crisis "buying opportunity" call and was trading on Friday in the neighborhood of $105.
And just last week the world's largest airplane maker reported second-quarter results that beat estimates – and followed up by boosting its full-year earnings forecast.
Boeing said it earned $1.67 a share (excluding pension expenses) in the second quarter – well above the $1.58 analysts had been looking for. The company had been forecasting full-year earnings of $6.10 to $6.30. But it increased that full-year projection from $6.20 to $6.40 thanks to faster-than-expected aircraft deliveries and lower 787 Dreamliner production costs.
And Wall Street is catching on – last week, a major Wall Street firm said Boeing is worth $125 a share.
Last Wednesday, citing a positive view of the defense/aerospace sector, Deutsche Bank AG (NYSE ADR: DB) analysts maintained a "Buy" rating on Boeing and boosted its target price to $125 a share.
"We like Boeing into the quarter on the back of better-than-expected second-quarter deliveries and [the] likelihood of a small uptick to guidance and continued progress on 787 production costs," said Deutsche Bank analyst Myles Walton.
As the earnings report show, Boeing is getting stronger – not weaker. And we're not just talking about the numbers themselves – but rather are looking at the inherent business improvements that Boeing is making to bring about those bottom-line gains.
Those improvements include:
About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.