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Boeing's Back in Town


Boeing is not just commercial jets. It has an entire Integrated Defense Systems business that runs the gamut, from fighter planes and bombers to missile defense systems.

"I've got to out and make my way
I might get rich you know I might get busted
But my heart keeps calling me backwards
As I get on the 707
Ridin' high I got tears in my eyes
You know you got to go through hell
Before you get to heaven"
-Jet Airliner (Performed by The Steve Miller Band, written by Paul Pena)

Well, although they were written a good 30 years ago, these lyrics are ringing true for me today.

My sense is that with all of the "fear of the unknown" out there right now the market is going to have to endure a bit of hell, but Jet Airliner is timely for another reason today.

Take a look at Boeing's (BA) earnings yesterday. It was not the famed 707 that got it across the finish line, but the new 787 Dreamliner. Now, if you have watched what is going on with the U.S. carriers over the last year or so you would surmise there is no way Boeing could thrive.

American Airlines (AMR) was a $41 stock in January that is currently trading with a $27 handle. U.S. Airways (LCC) was a $63 stock in November 2006 and is currently trading around $33.00.

But U.S. carriers are not the story. Lan Airlines (LFL) from Chile just said its plan is to incorporate 32 787 Dreamliners into its fleet between 2011 and 2016. Qatar Airways appears to be jumping on the 787 bandwagon. El Al is mulling a purchase as well. Virgin Atlantic just ordered another eight aircraft, bringing its total order up to 23.

In June, Boeing forecasted 28,600 new airplane deliveries over the next 20 years. Back in June, the CFO of Delta Airlines (DAL) Jim Whitehurst said that it is considering "a massive order over a long period of time." But by and large the U.S. carriers have not participated in this order parade.

At some point they will as existing fleets continue to age and the more fuel-efficient 787 begins to make economical sense. The 787 will use about 20% less fuel than comparably-sized aircraft of today.

And it is important to remember that Boeing is not just about commercial jets. It has an entire Integrated Defense Systems business that runs the gamut, from fighter planes and bombers to missile defense systems. In today's world this cannot be ignored.

Now, the naysayer will say that all of what I have outlined is priced into the stock and at current price levels they may have a point. Remember Boeing, which is currently trading around $106, was an $85 stock in January.

But since March 2003, every pullback in the stock price has provided a fantastic buying opportunity and I think that trend will continue for the foreseeable future. With James McNerney manning the controls I still think the sky's the limit for Boeing.
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No positions in stocks mentioned.

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