Our Profit Time Machine Leads to a Big Boeing (NYSE: BA) Win

Let's pretend we run a time-machine service that can take us to market "events" of the near - or distant - past.

Today's jaunt will take us back to January 2013 - during the whole Boeing Co. (NYSE: BA) "Dreamliner battery" media frenzy.

I'm sure you remember it...

How Readers Doubled Their Money

Years of delays, production issues, and other miscues had already combined to transform the image of the new Boeing 787 Dreamliner from wunderjet to white elephant. (Albeit an elephant with wings and two engines - the Dreamliner is a plane, after all.)

Then along came the early 2013 battery issues, which raised the specter of in-flight fires. That ignited a media feeding frenzy that lasted - indeed, escalated - for 11 straight days before the U.S. Federal Aviation Administration (FAA) and aviation authorities in other countries grounded the once-promising jet.

And that brought forth media epitaphs on the greatest U.S. plane maker.

I told Private Briefing readers to ignore the hue and cry.

I also told them to buy the stock.

Those who acted on that call have cashed in big.

And that back-in-time tale hints at an emerging current-day opportunity in this same stock. So let's take a look.

But since we're back in 2013, let's stay there a little bit longer. As a former journalist, I've seen media feeding frenzies like the Dreamliner battery brouhaha firsthand countless times - including several instances where my own colleagues were participants.

And I knew that they're usually overblown - and therefore blow over.

Besides, I'd already recommended Boeing to you Private Briefing readers on several occasions before that - with the first recommendation coming at $61.92 a share back in September 2011.

And I've watched Boeing, the company, for years - and I mean, literally, for years.

That's why I was able to say - with conviction - that I believed Boeing would shrug off the "scandal" and climb to new highs.

And it did, zooming from $75 a share during the crisis to more than $144 - a 90% gain in 12 months. And the surge to the record peak of $158.83 means the stock more than doubled following that overblown battery mess.

Here's why I'm retelling this story.

And it isn't to boast.

Let's return, now, to the present day and look at what's happening with Boeing right now.

Two Hits, Two Runs... One Error

Boeing shares closed down 1.4% yesterday - and were down more than 2% at one point - after its first-quarter results disappointed investors.

The company said it earned $1.97 per share for the first quarter - a 12% jump that was well above the consensus estimate of $1.81.

The problem was that revenue - the proverbial "top line" - fell short of expectations. And so did free cash flow (FCF), the metric the company said it wants Wall Street to use as its yard stick when assessing Boeing's performance.

Boeing's revenue increased 8% to $22.1 billion, which was under analyst projections. Free cash flow plunged to a negative $486 million, a $1.1 billion swing from the positive $615 million a year earlier and a result that was way below what investors had been looking for.

The company said the lower FCF number was due to a mismatch in the timing of receipts and expenditures like customer advances. And executives said they were still projecting strong (and positive) FCF figures for the full year.

But it was an embarrassing lesson in execution, one analyst observed in a shrewd note to clients.

"Boeing is perhaps learning the hard way that if you tell investors to focus on the cash flow, then you had better deliver it," the analyst, Robert Stallard of RBC Capital Markets, wrote in his research note.

The news wasn't all bad, however. Boeing also reaffirmed its full-year guidance for both revenue and profits. It said it delivered 184 commercial jets in the first three months of the year - well ahead of the 161 delivered during the same quarter last year. And the company also met its objective by delivering 30 Dreamliner jets during the quarter.

So we've gone to the past. And we're returned to the present.

Now it's time to talk about the future - and what you should do about the company's stock.

If you already own Boeing, hold onto the stock.

If you don't, start "accumulating" it now.

Here's why ...

Just Keep Buying

We've been consistent Boeing bulls since we made our initial recommendation back in September 2011.

And we've repeatedly re-recommended it, underscoring that it's one of our favorite stocks.

Late last year, Boeing bolstered our case when the company announced a 25% dividend increase and authorized a new $12 billion stock buyback program.

We were contrarian Boeing bulls when we first recommended the stock. And we've taken advantage of every downtick to urge you folks to weigh in.

And prior to the emergence of this week's perceived-to-be-tepid earnings report, the Boeing aerial bandwagon had gained quite a few passengers: Earlier this year, in fact, several analysts were projecting prices for the aerospace firm as high as $200 a share - a 32% gain from where the stock's trading right now.

Here's the takeaway...

Boeing's immense long-term potential hasn't changed - we'll get to that in a moment.

And the company's near-term prospects are actually pretty good.

The company, now based out of Chicago, has been delivering jetliners at a record pace - even though it's had to work around shortages of such key supplier-provided components like seats.

Indeed, according to The Wall Street Journal, a shortfall of business-class seats made by French supplier Zodiac Aero ADR (OTCMKTS ADR: ZODFY) has slowed production of some Dreamliners for customers like American Airlines Group Inc. (Nasdaq: AAL) and Etihad Airways. And a labor dispute at ports out on the West Coast disrupted shipments of components, too.

Despite all this, Boeing's production rates for single- and twin-aisle jets are higher than they've ever been. And the company affirmed plans to deliver between 750 and 755 jets this year - up from 723 in 2014. The "seat issue" is expected to be fixed, soon.

While accumulated costs for the Dreamliner continue to rise from their already higher-than-forecast levels, those costs are projected to peak this year. And analysts told The Wall Street Journal that the jet maker is already making progress on that front.

One of those analysts - Robert Spingarn from Credit Suisse Group AG (NYSE ADR: CS) - told clients in a research note that the program's cost reduction "finally showed a meaningful decline," calculating that losses on each plane delivered (above its average selling price) had dropped from $50.1 million early last year to $32 million in the fourth quarter to $26.4 million today.

But it's the long-term outlook that really ignites our profit-seeking afterburners.

And that outlook is why we keep telling folks to accumulate Boeing shares.

Billions and Billions... and Trillions and Trillions

Each year, Boeing puts together a detailed document known as the "Current Market Outlook" - which looks at projected jetliner demand for the 20 years to come.

When we first recommended Boeing to you, the company was projecting demand for $4 trillion worth of commercial jetliners in the two decades to follow. Just three-and-a-half years later, that long-term aggregate demand is forecast to be $5.2 trillion.

According to Boeing, there will be a long-term need for 36,770 new airplanes (up from 33,500 jetliners in the projection we cited back in 2011).

We're talking, of course, about sales by all manufacturers - not just Boeing.

But that's a huge market.

According to Boeing, 15,500 of these airplanes (42% of all new deliveries) will replace older, less efficient airplanes. The remaining 21,270 airplanes will be for fleet growth, which represents expansion in emerging markets and development of innovative airline business models.

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Single-aisle airplanes ("narrow body," in industry parlance) - like the Boeing 737 and 757 jets - continue to command the largest share of the market. Approximately 25,680 new single-aisle airplanes will be needed over the next 20 years, Boeing says.

Fast-growing, low-cost carriers and network carriers that need to swap out aging jets will drive narrow-body sales.

Then there are the twin-aisle jets, known as "wide-body" planes - which include the Boeing 747 Jumbo Jet, as well as the 767, 777, and 787 Dreamliner entries.

According to Boeing, there will be a need for 8,600 new wide-body airplanes. The new generation of efficient twin-aisle jets - like the Dreamliner - is helping airlines open new markets that would not have been economically viable in the past, the company said.

Boeing's commercial jetliner business is healthy - very healthy, in fact.

The company's overall "backlog" soared to a record $502 billion at the end of last year - a figure that was boosted by a record $152 billion worth of net orders during the year.

And the company itself is healthy: It ended the year with $13.1 billion in cash and marketable securities.

The strong cash flow it's forecasting, the ongoing growth, and the good cash position will allow Boeing to keep buying back stock and raising its dividend.

So whenever this stock trades down a bit, if you don't own it already, take some spare cash and pick up a few shares - and put them away. Keep doing this, and a few years from now, you and your family will be very happy you did.

I don't want to have a situation where, 20 years from now, you look at Boeing's hefty long-term total return... and feel regret over not having bought the stock.

Because you won't have access to a time machine that will let you travel back to today to make a different choice.

More from Bill: A little over a year ago, on December 2, 2013, the CEO of a tiny defense contractor bought over 30,000 shares of his own company. The stock went up 30% in just over a month. Recently, this CEO snapped up even more shares. This time Bill expects the stock to pop by 108%. For full access to Bill's report on this incredible opportunity, click here.

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 at Money Map Press.

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