The international commercial airplane producer, The Boeing Co. (BA) delivered 150 airplanes in the second quarter of 2012 versus 118 airplanes in the second quarter of 2011. The majority of airplanes delivered during the three months were of the 737 family.
The 737 model continues to be a major pillar of Boeing’s strength in the commercial airplane sector, followed by its 777 model. Both these models continue to do well due to their fuel efficiency and lower operating costs compared to competing models. In the first six months of 2012, 208 ‘737 and 42 ‘777 airplanes were delivered.
Boeing delivered 287 airplanes in the first half of 2012, which is higher than 222 airplanes delivered in the same period of 2011. However, we believe the delivery rate in the first half of 2012 was a bit slower than expected. Boeing expects its commercial airplane deliveries for 2012 in the range of 585 to 600 airplanes.
Boeing’s delivery guidance for 2012 includes 70 to 85 ‘787 and 747-8 airplanes, half which are of the 787 variety. The company is trying to increase the production level of the 787 model at its Everett, Washington factory and instituting a new line in North Charleston, to meet the delivery target.
The order book of the leading airplane manufacturer indicates a gradual recovery in the commercial airplane market. Gross orders received by the company in the first half of 2012 were 476 airplanes versus 230 airplanes in the year-ago period.
Boeing expects commercial airplane demand to improve substantially over the next two decades riding on the back of a recovering world economy and strong demand for fleet addition and replacement by airline operators. Boeing expects delivery of 34,000 commercial airplanes in the next 20 years, valued at a considerable $4.5 trillion.
Boeing’s closest international peer in the commercial airplane market is France-based Airbus. Airbus delivered 279 airplanes in the first six months of 2012, marginally lower than Boeing’s delivery sheet. The gross order count of Airbus over the said period was 253 airplanes, much lower than Boeing’s order book. Boeing benefited from big orders from Lion Air and Norwegian airlines.
Boeing expects commercial airplanes to generate revenues in the range of $47.5 billion to $49.5 billion in 2012, exceeding the 2011 level of $36.2 billion.
Chicago-based The Boeing Co. currently has a Zacks #3 Rank (short-term Hold rating). We also maintain a long-term Neutral rating on the stock. The company competes with the likes of General Dynamics Corp. (GD), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC) in varied niches.
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