2014: A strong growth year
Boeing (BA) saw strong order growth in 2014 and is continuing to see new orders since 2015 began. The company had a rough year, with no orders for its 747-8 aircraft in 2014. However, Boeing won a ~$1.1 billion deal for three of its 747-8 freighter airplanes from Azerbaijan-based Silk Way West. Boeing expects this momentum to continue throughout the year.
Boeing has generated tremendous growth over the last five years, accounting for about 45% of the total market share for global aircraft deliveries in 2014. The company has a strong business model that focuses on its core competencies of manufacturing aircraft. To support its business model, Boeing has a vast product portfolio that has generated growth and has hedged the company against potential downsides.
Boeing’s robust commercial segment has driven its growth in the past five years and is estimated to grow at 5% in the coming year and beyond. The company has also planned production ramp-ups for most of its aircraft, making it reasonable to expect better sales growth and margins.
2015: Boeing’s expectations
During the next year, Boeing also expects to generate strong cash flows primarily driven by C-17 aircraft orders, increased deliveries, strong operating performance, and reducing the costs of the 787 Dreamliner. The company’s capital expense is expected to be around $2.8 billion, driven by the new 777X facilities and equipment, as well as other investments to support continued growth and productivity.
Boeing can see short-term and long-term improvements in the 787’s cash performance if it continues to execute its strong order backlog and capture its additional productivity gains.
Boeing’s competitors include aerospace companies like Honeywell International (HON), Lockheed Martin (LMT), and Rockwell Collins (COL). These companies have a 2.91%, 2.04%, and 0.40% holding, respectively, in the Vanguard Industrials ETF (VIS). Boeing (BA) forms 5.17% holding of the Industrial Select Sector SPDR ETF (XLI).
All these factors indicate a potential upside for Boeing in 2015, making it a good investment option.