Boeing | First Look: Buy or Bail?
Everyone is searching for companies with economic moats. I present to you exactly one of those that no one seems to want and will 2x from here.
BA 0.00%↑ is interesting at these levels for several reasons.
Their backlog is over $500B
Down 40% from all time highs.
Their new CEO is turning the company around.
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Company: Boeing
Ticker: BA
Market Cap: $130B
Stock Price: $172.83
Boeing has had a rough few years with major disasters and frequent issues. But when it comes down to it, they operate in a strong duopoly and have a firm backlog of over $500B.
But before we dive into why the are a good opportunity right now lets get clear on what they do.
Boeing breaks their revenue into the following segments:
Commercial Airplanes
Defense, Space, & Security
Global Services
Commercial airplanes should be self explanatory. Boeing makes jets for airline companies around the world.
Defense, space, & security is a much more broad segment. It consists of making military aircraft, weapons systems, surveillance equipment, and more.
Global services is their logistics, maintenance, upgrade, and modification segment. It's designed to continue getting revenue from the sold goods of the other two segments.
Now that you know what they do why are they worth looking at?
They are down over 40% from all time highs trading at on 1.3x peak revenue.
They operate in a strong duopoly with Airbus.
Their historical return on capital and margins are superior to Airbus.
Their backlog is over $500B.
Their new CEO is Kelly Ortberg is an engineer and previously ran Rockwell Collins.
Boeing is one of those companies everyone will hate right up until they flip and love them. They are making the changes to their business under their new CEO so margins can rebound. But still no one wants to pay attention.
Compared to most investments this one is very simple. The only other pieces I need to get clear on is how management bonuses are structured. And any risks that could materially affect their future.
Their catalysts are already in place with the new CEO and given time I have no doubt they will return to profitability in a major way.
With good ROIC and a duopoly when Boeing gets back to $10B+ in FCF over the next few years they could easily command a 20x multiple. While this isn’t the highest return opportunity available it is a very high conviction one.
Keep your eye out in coming weeks for my full deep dive on Boeing. Covering the details of their turnaround, new CEO, risks and valuation!
What do you think of Boeing and this weeks newsletter?
Disclaimer:
This content is provided for informational and entertainment purposes only and should not be construed as professional financial or investment advice. The opinions expressed herein are solely those of the author, based on personal research and analysis, and do not reflect the views or advice of any financial institutions or licensed professionals. I do not have access to your personal financial situation, goals, risk tolerance, or investment preferences, and therefore cannot provide personalized investment recommendations. It is essential that you conduct your own research, carefully consider all relevant factors, and consult with a licensed financial advisor or other professional before making any investment decisions. Investing inherently involves risk, including the potential loss of principal, and past performance is not indicative of future results. I am not responsible for any decisions, actions, or outcomes resulting from the use of this content. Always ensure that your investments align with your personal financial situation and long-term objectives.
See you in the next edition!