For Immediate Release
Chicago, IL – May 19, 2010 – Zacks.com Analyst Blog features: Boeing Company (BA), Embraer (ERJ), Force Protection Inc. (FRPT), General Dynamics Corp. (GD) and SIRIUS XM Radio Inc. (SIRI).
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Here are highlights from Tuesday’s Analyst Blog:
Boeing Spikes 737 Production
Boeing Company (BA) announced plans to increase production of the Next-Generation 737. Boeing will increase the production rate to 34 airplanes per month in early 2012 from the current rate of 31.5 airplanes per month.
Boeing has sold over 5,200 Next-Generation 737 to its customers throughout the world. Even the decline in the global economy has not reduced the demand for the Next-Generation 737, given its efficiency and low operating costs. The company still has more than 2,000 unfilled orders from over 80 customers worldwide.
Boeing’s plan to ramp up production aims to satisfy the growth in demand as well as fleet replacement needs of its customers. The company continues to explore the avenues for future production growth, given the steady demand for the 737. The company also intends to re-engine the 737 airplane, which will improve the fuel efficiency by 10-15%.
The company will require more raw materials to meet its higher production rate of the Next-Generation 737, and the suppliers of Boeing are prepared to meet the enhanced requirements.
Boeing’s peers, Embraer (ERJ), Force Protection Inc. (FRPT) and General Dynamics Corp. (GD) have yet to come up with a commercial airplane which will challenge the dominance of the 737.
SIRIUS Foresees Serious Growth
Satellite radio service provider SIRIUS XM Radio Inc. (SIRI), which was facing bankruptcy just a year ago, is now gradually moving towards stabilization. Yesterday, the company announced that it will generate significant subscriber growth in 2010. SIRIUS XM now expects to add 750,000 net subscribers in 2010, much higher than its previous prediction of 500,000.
SIRIUS XM’s business depends to a large extent upon automakers. The sale and lease of vehicles with satellite radios is the most important source of revenues for both the XM and SIRIUS satellite radio services. Improving U.S. economic conditions have resulted in the recovery of auto sector sales, together with better-than-expected consumer spends, prompting management to present a rosy picture.
SIRIUS XM added 171,441 net subscribers during the first quarter 2010. This means for all the remaining three quarters of 2010, the company should add an average of nearly 12.5% more subscribers. We believe improvement in the conversion rate and a reduction in self-pay monthly churn rate are the main reasons for this optimism.
Furthermore, SIRIUS XM now expects proforma revenue for full fiscal 2010 to be $2.75 billion, compared to $2.7 billion estimated earlier. Proforma adjusted operating income is likely to be $575 million, compared to $550 million predicted earlier. In its first quarter 2010 earnings conference call, management predicted that SIRIUS XM will generate positive free cash flow for full fiscal 2010. Now revised estimates more categorically indicated that free cash flow for 2010 will exceed $100 million.
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