Aerospace and defense giant, The Boeing Company (BA) announced that it has inked a deal valued at $2.8 billion with the flag carrier of Hong Kong, Cathay Pacific to supply 10 777-300ER airplanes.
Cathay Pacific first announced its selection of the 777-300ER for its fleet requirements in 2005. With this order, Cathay Pacific will increase its Boeing 777-300ER planned fleet from 36 to 46 (including 4 leased). It’s the fifth increase in its acquisition plans for the long-range jetliner. Cathay Pacific uses the Boeing 777-300ER as the backbone for its ultra-long-haul and long-haul fleet, mainly serving destinations in North America and Europe.
Boeing is focused on getting a big slice from the revival of the fortunes of the airliners globally. Fiscal 2010 witnessed a steep rise in global passenger traffic and air cargo traffic over fiscal 2009 levels. However, the recovery was skewed more towards emerging markets with low cost carriers leading the recovery and growth.
Per the company’s estimate over the next twenty years passenger and cargo traffic is slated to grow at an annualized rate of 5%. Boeing expects over the next twenty years the worldwide airplane fleet would require 30,900 new airplanes valued at a mammoth $3.6 trillion. This brings good news not only for Boeing but for the long queue of aerospace component manufacturers like TransDigm Group Incorporated (TDG) and Rockwell Collins Inc. (COL).
However competition is also heating up for Boeing in the commercial airliner business. Apart from European arch rival Airbus, regional jet makers like Empresa Brasileira de Aeron (ERJ) and Bombardier Inc. have also jumped in to the fray.
Based in Chicago, Boeing designs and produces commercial airplanes, defense systems and civil and defense space systems.
Boeing’s fourth quarter 2010 earnings of $1.11 per share missed the Zacks Consensus Estimate by 2 cents. The company expects 2011 operating earnings per share to be in the range of $3.80–$4.00. The Zacks Consensus Estimate, for 2011, currently pegged at $4.10 per share, is higher than the company’s guidance.
Boeing has a unique position as the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries, and also as one of the largest aerospace and defense contractors in the world. Its revenue exposure is spread across more than 90 countries around the globe.
Boeing currently retains a Zacks #4 Rank (short-term Sell rating). Considering the fundamentals, we are maintaining our Neutral recommendation on the stock.
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