Back-to-Back Wins for Boeing Add to Our Bullish Outlook
Here’s the next catalyst we’re watching for the shares.
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Following yesterday’s comments on Boeing (BA), two sizable wins are being reported, and both build on the company’s existing multi-year backlog for both its Commercial Airplane (CA) segment and its Defense, Space, & Security (DSS) segment. This reaffirms our view that we should see higher production levels ahead that drive favorable incremental margins and bottom-line results.
The first win was Boeing being selected by the U.S. Space Force to develop the next generation of satellites supporting the Mobile User Objective System, or MUOS, under a contract valued at up to $2 billion. This is a nice win that sits on top of other quarter-to-date wins. In aggregate, they point to another step up in the backlog level at Boeing’s DSS segment. Exiting March, that figure stood at $86 billion. In our view, the DSS segment is often overlooked, but it provides a steady business that helps smooth out swings in the CA business.
Fortunately, that CA business is on the upswing, which is underscored by the latest order from China Southern Airlines. The win for Boeing is valued at $3.62 billion and is for Boeing freighter aircraft, including two 777F and five 777-8F models. There is also an option to purchase three additional Boeing 777-8F aircraft. China’s aviation market is expected to remain one of the most important growth drivers for the global aerospace industry. Continued investment in airport infrastructure, airline capacity, and fleet modernization programs could further strengthen demand for aircraft and engines.
All in all, these are very nice wins, but the real catalyst for BA shares, in our view, will be the June commercial airplane delivery figure, which could show up late next week but has a higher probability of being published after the July 4th holiday.
At the time of publication, TheStreet Pro Portfolio was long BA.
