Aerospace & Defense

For Boeing Investors, the Music Never Stops

Boeing Co.’s (NYSE: BA) cash register is singing and ringing out one of the best years in the company’s history, at least as far as an annual share price increase is concerned. The stock has gained nearly 82% for the year to date and, barring a disaster of biblical proportions, Boeing will easily be 2017’s best performing of the 30 stocks that comprise the Dow Jones Industrial Average.

On Monday, Boeing announced a 20% increase in its quarterly dividend from $1.58 to $1.71. That’s on top of a 30% increase last year.

The company’s board also approved a new $18 billion share buyback program to replace the $14 billion plan adopted last December. So far this year Boeing has repurchased $9.2 billion worth of its common stock. The new buyback program is envisioned to last for the next 24 to 30 months.

CEO Dennis Muilenburg said:

Boeing’s strong and growing cash flow allows us to deepen our commitment to provide competitive returns to our shareholders, while continuing to invest in our people, innovation and growth. To support our balanced cash deployment strategy, our team remains focused on improving operating performance as we deliver on our substantial order backlog and work to capture a larger share of the growing aerospace market.

Boeing has forecast 2017 operating cash flow at $12.25 billion to $12.50 billion and has booked some $10.44 billion through the first three quarters of the year, including $3.4 billion in the third quarter alone. The forecast seems better than safe.

Deliveries of new commercial jets were forecast at 760 to 765 aircraft. The company had delivered 554 planes at the end of the third quarter, including some 202 in the quarter. A similar delivery rate for the fourth quarter would put the total at 756. Through November, Boeing has delivered 680 new commercial jets, so the company still has some work to do to meet its forecast.

Last December Boeing got off on the wrong foot with then President-elect Donald Trump, but Muilenburg concentrated on fixing that early, and since June Boeing stock has been on a tear. Muilenburg defused that nasty situation and then brought up another more to Trump’s liking — the trade case against Canada’s Bombardier.

Later this week Delta Air Lines Co. (NYSE: DAL) is expected to place an order for as many as 100 single-aisle jets, with an option for that many more, with either Boeing or Airbus. The Bombardier trade case — which involved Delta buying 75 CS-100s from the Canadian maker — could be a bargaining chip Boeing can play to win the deal over Airbus. Scott Hamilton at Leeham News rates the competing Airbus A321neo and Boeing’s 737 MAX 10 (737-10) as economic equals.

But the proposed 300% tariff on the 75 jets Delta bought from Bombardier could be waved off if Boeing volunteers to withdraw its complaint. Alternatively, Delta could have insisted that Boeing withdraw the complaint as a prerequisite for the order.

Then there’s the politics. If Airbus wins, the new planes would be built at the company’s plant in Mobile, Alabama. And now that everyone knows how much President Trump loves Alabama, Airbus has a card to play as well. Still, Boeing — through Muilenburg — holds the Trump card here.

Boeing posted another new 52-week high this morning of $292.80. The 52-week low is $153.06, and the 12-month consensus price target is $287.50, not because there are a lot of naysayers, but more likely because analysts can’t keep up with the stock’s price growth.

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