Boeing Co. (NYSE: BA) has shrugged off concerns that Chinese sanctions will hurt its business there and, with a huge backlog of orders, is the best performing Dow stock of 2019. Its shares are higher by 9.4% so far this year to $353.
Among the primary reasons for investor optimism is the extent to which Boeing has successfully competed against its only real rival, which is Europe’s Airbus. Boeing delivered 906 commercial aircraft in 2018. Airbus delivered 763. Just as important, Boeing’s net orders were 894 commercial aircraft to Airbus’s 747.
Boeing’s edge will be more important over time, if it can keep it. The company’s widely followed 20-year forecast of global commercial airplanes shows that 42,730 new jets will be needed over the period. The value of these will be $6.3 trillion. When the estimate was released, Randy Tinseth, vice president of Commercial Marketing for Boeing, said:
For the first time in years, we are seeing economies growing in every region of the world. This synchronized growth is providing more stimulus for global air travel. We are seeing strong traffic trends not only in the emerging markets of China and India, but also the mature markets of Europe and North America.
Another reason investors are optimistic is Boeing’s move into smaller jets via a joint venture with Brazil’s Embraer. Boeing will put $4.2 billion into the deal to own 80% of the new venture. It will help Boeing sharply reverse one of its weaknesses, which is a role in the regional jet market.
Boeing’s other large business, which builds jets, helicopters and missiles, has thrived due to the increase in defense spending both in the United States and overseas. Boeing’s Defence, Space and Security revenue rose 13% to $5.7 billion in the third quarter of 2018 over the same period a year ago. Boeing’s entire revenue for the period was $25.1 billion, up 4%. Boeing also bumped guidance higher, posting:
The company’s revenue guidance increased $1.0 billion to between $98.0 and $100.0 billion, driven by defense volume and services growth, inclusive of the KLX acquisition.
KLX is an aviation parts distributor.
One of Boeing’s primary advantages is that it operates two huge businesses, each of which is performing above most expectations.
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