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.
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.