Boeing Company (BA) has been trading in the range of $97.90 to $104.02 over the past 30 days. The stock has been showing support around $85 and resistance at $104. The stock is trading above the 50-day and 200-day moving averages, but RSI (14) shows signs of divergence while MACD is neutral.
Tradespoon indicators give a short-term bullish view on BA.
FUNDAMENTALS
BA’s short-term bullish technical indicators are supported by strong fundamentals, as well.
THE NUMBERS
The company reported that it earned $1,106 million for the first quarter, or $1.44 per share. That’s up from $923 million, or $1.22 per share, in the same quarter last year. First-quarter 2013 results included the expected benefit of $0.19 per share for the 2012 research and development tax credit. Revenues fell by 3%, to $18.9 billion, from $19.4 billion. Revenues of $18.9 billion reflect higher deliveries on the 737 and 777, offset by lower 787 deliveries.
For 2013, Boeing forecasts adjusted earnings of $5 to $5.20 per share on revenue of $82 to $85 per share. GAAP operating margin was 8.1%, the same as the operating margin for the first quarter of fiscal 2013. Cash flow from operating activities was $524 million, compared to $839 million in the first quarter of fiscal 2013, therefore down by 38%.
Technical issues with the new 787 Dreamliner were a source of weakness for Boeing, but still the growth rate in emerging markets is strong—the global aerospace growth rate is 5%, nearly double the growth rate of global GDP.
Boeing’s PE stands at 19.41, which is slightly above the industry average of 18, and well above the S&P 500 average of 16.70. The stock is currently trading 39% below its intrinsic value of $168.78, which suggests that the stock is undervalued at these levels. BA’s current price/sales of 0.96 is close to the industry average of 0.97. BA’s beta of 1.03 implies similar volatility to that of S&P500. The company’s total debt/equity of 121.31% is high, but less than the industry average of 391.8%. BA’s last annual dividend was $1.85.
DEBIT CALL SPREAD
Technical and fundamental indicators both show short-term bullish signals for BA. Investors should consider the following debit call spread:
Buy August 2013 100.00 Calls at $3.70 and sell the August 2013 105.0 Calls at $1.60. The net debit to start is $2.10, and we recommend holding until spread price reaches $4.20.
This strategy will allow you to collect time premium for out of the money short calls and decrease the overall cost of the initial investment.
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