The Boeing Co - Stocks

Instrument description

Airplanes have revolutionized the world when it comes to traveling from one place to another and all over the world. One of the benchmark and pioneer company when it comes to designing and development of airplanes is Boeing, which is still the leading supplier of airplanes to nearly every airline of the world. Boeing is a US multinational aerospace company that has wide portfolio that includes commercial airplanes, military aircraft, satellites, electronic and defense systems, helicopters, and launch systems.

Boeing is the world's biggest aerospace company and largest US manufacturing exporter. Boeing has the world’s biggest building in Everett, Washington, according to volume and the factory is 100 acres and helps in the manufacturing of all Boeing’s top airplanes that include 747, 777, and 787.

Boeing’s headquarter is situated in Chicago, Illinois, USA, and the company employs 161,100 employees. Boeing is more than 100 years old companies that has set many benchmarks and achieved numerous landmark feats in its business history. The Boeing 707 is still considered the benchmark for all the airplanes made today, and the Boeing 747 changed the scope of long-distance travel.

Boeing 747 was launched in 1970 and remained the largest passenger airplane until Airbus A-380 that has its first flight in 2005. The Boeing 787 Dreamliner is the latest flagship carrier of the company and known to be the most advanced and fuel-efficient airplane. After the maiden flight in March 2009, the 787 Dreamliner got 1000 orders, which were the most for any airplane in the history of aviation. Boeing has regional executives in many popular global places that allow the company to extend its global reach.

History of Boeing

William E. Boeing founded Boeing in 1916 in Seattle, Washington. William Boeing was a timber merchant who formed Aero Products Company that started making and selling speedboats to US Navy. The company was renamed to Boeing Airplane Company In 1917.

In 1928, William Boeing formed Boeing Airplane and Transport Corporation that would oversee both airline and manufacturing operations, and in the following year, the company acquired other airplane makers such as Chance Vought, Sikorsky Aviation, Avion, and Stearman Aircraft and the company was renamed United Airplane and Transport Corporation.

Boeing combined four airlines into United Airlines and took its ownership in 1931, but US antitrust law in 1934 forced Boeing to let go of its airline service. In 1960, Boeing bought Vertol Corporation that was a leading manufacturer of helicopters. Boeing was the key player in designing and producing the first stage of Saturn V Rocket that helped in the Apollo expedition to the moon.

Boeing debuted on the New York Stock Exchange and held its Initial Public Offering (IPO) on January 13, 1978. The stock of Boeing has split into six occasions, with 3 for 2 split in 1979, 1980, 1985, 1989, and 1990. A split of 2 to 1 occurred on May 16, 1997.

Boeing’s share price climbed to $31 in 1990 but saw a downtrend in 1993. In 2001, the share price was a strong $66, but in 2003, the share price dipped to $25 due to selling pressure, but the staggering rise resulted in the share price touch $108 in 2007.

The global recession of 2008 caused a decline in the share price of Boeing, and in 2009 the share was $32. The $100 barrier was crossed in 2013, and the oil price crash in 2014 further extended the upward movement, and the share price touched a record high of $368. Boeing pays steady dividend value to its shareholders. In 2000, dividend paid was $0.14 but peaked at $1.72 in 2018. The lowest dividend yield of Boeing was 0.5% in 2011.

At the end of 2017, Boeing and Elon Musk’s SpaceX got competitive on mission to Mars, and Boeing CEO, Dennis Muilenburg said that the company along with NASA is in final stages of developing a rocket called Space Launch System, which would be the first carrier to send humans to Mars. At the end of 2017, in December, Boeing came in takeover talks with Brazilian aerospace giant ‘Embraer’ for a deal worth $3.7 billion. However, the deal would only be finalized due to approval from the Brazilian government.

The share price of Boeing climbed at a steady rate from 2013 to 2017, and the company was also ranked 24 in the list released by Fortune 500 in 2017. The takeover talks with Embraer increased the share price of Boeing, and it touched $341.50 on March 2, 2018, which also increased the market capitalization of Boeing to $202.2 billion.

Over the years, Boeing has achieved complete dominance in the aerospace industry, and it is made possible due to certain mergers and acquisitions that the company has done. Some of the notable deals include

• Acquiring aerospace and defense units of Rockwell International Corporation in 1996
• A merger with McDonnell Douglas Corporation on August 1, 1997
• A partnership with General Electric to form ‘Boeing Business Jets’ that would make business jets and business versions of 737, 777, and 747 airplanes

Current Business and Investment of Boeing

Boeing is a very large company and so categorized in four divisions which are

1. Commercial Airplanes: This is the main segment of the company that is involved in developing, producing, and marketing commercial airplanes along with technical services to the commercial airline industry
2. Defense: This division researches, designs, develops, tests, and produces military aircraft that includes manned and unmanned aircrafts.
3. Space and Security: This segment also researches, develops, produces, and modifies space aircraft and many other space-related equipment and devices.
4. Boeing Global Services: The Boeing Global Capital Corporation provides financial assistance and solutions to support the units globally that includes finance leases, operating leases, notes and receivables, and assets held for investment or re-leases.

For decades Boeing is the name synonymous to craftsmanship, safety, and security. Today, Boeing manufactures hundreds of aircraft in its popular series that includes 737, 747, 767, 777, and 787. The Boeing 737 is the most popular airplane in the world, and nearly 18 billion people have traveled on the aircraft since it came into service.

Risk and Potential in Boeing Environment

Boeing is a giant manufacturing company and making hundreds of aircraft is no easy feat as it involves the production of aircraft parts such as fuselage, wings, engines, stabilizers, and then their assembly. There is a wide range of electronic equipment that needs to be made and calibrated precisely to ensure safe and secure take-off and landing of the aircraft. Fortunately, manufacturing airplane requires enormous amount of resources that Boeing already has and which makes it the leader in the aviation industry and it has only one or two close competitors.

Boeing has global fame in manufacturing commercial airplanes along with satellites, defense, and communication systems. The company also makes simulators that allow pilots to get the necessary training for the aircraft and be professionally trained to fly the aircraft. Boeing also provides technical support and performance-based logistics to several airlines. Boeing has recorded significant growth in revenue and operating profit in recent two years due to supply of 737, 777, and 787 airplanes. However, there is a crucial time for Boeing due to the Coronavirus pandemic. The SWOT analysis of Boeing is given by

• Strengths

Boeing has a very strong and dominant position in the aerospace industry. The technological and manufacturing competency allows Boeing to achieve economies of scale and profitability. The operational efficiency of Boeing increases revenue and profits. The company has a strong Research and Development sector that helps in bringing innovation and streamlining processes. Boeing is continuously working for fuel efficiency by using sustainable fuels and reducing carbon emissions.

• Weaknesses

The workforce of Boeing forms a labor union that often stops work for approval of their demands, which hinders productivity and delays the delivery of airplanes and sends a bad reputation of the company. The main client of Boeing is the US government and accounts for almost 27% sales, but long term government contracts are often subject to political and economic factors that cost Boeing in the long run. Boeing is heavily dependent on certain suppliers for parts, and raw materials, which makes the suppliers strong, and the unavailability of supplies will directly affect productivity.

• Opportunities

The demand for modern and advanced airplanes is increasing. There are hundreds of airlines and national carriers that are looking to minimize losses and increase revenue by buying airplanes that are fuel-efficient and can travel long distances. The defense and aerospace market is growing steadily and is expected to increase by 3%, which will further boost revenue. Boeing can expand its business by merging and doing partnerships with other big companies associated with the aviation industry.

• Threats

Boeing faces major competition and challenges from Airbus, which is the second-largest airplane manufacturer and quite popular. The recent series of 737 Max airplane crashes not only cost the loss of lives, but major questions were raised on the safety and security of Boeing airplanes. The 737 Max airplanes were grounded worldwide due to air crashes from 2018 to 2019.

Stock Analysis of Boeing

Boeing is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbols ‘BA.’ The company is listed under the ‘Electronic Technology’ Sector, and the industry is ‘Aerospace and Defense.’

The all-time high share price of Boeing was $440.62 on March 1, 2019, and the average price in the last 52 weeks is $269.44.

Coronavirus pandemic has badly affected the aviation industry and both the airplane manufacturers and thousands of worldwide airlines. In May 2020, Boeing cut 12000 jobs, and in July 2020, the company reported a $2.4 billion loss due to Covid-19 and grounding of its 737 Max airplane across the world. The future with the ensuing Coronavirus situation looks bleak as the company is planning further production cuts and job cuts.

World-renowned investor Warren Buffet pulling out investment from three to four American airlines brought a more downward trend in the aviation market. Boeing has also recently stopped dividend payments and stock buybacks to stem the financial losses due to the Coronavirus outbreak. In the fiscal second quarter, Boeing delivered a mere 20 aircrafts, which was the lowest since 1977. The operating cash flow in Q2 was negative $5.3 billion. The market capitalization of Boeing declined under $70 billion, and in the future, it will take enormous effort to take the company out of its financial problems.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.