Company Overview

According to their 10-K filing, Boeing is “a global market leader in design, development, manufacture, sale and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems and services. We are one of the two major manufacturers of 100+ seat airplanes for the worldwide commercial airline industry and the second-largest defense contractor in the U.S. While our principal operations are in the U.S., we rely extensively on a network of partners, key suppliers and subcontractors located around the world.”  Additionally, 40% of their revenue comes from non-US sources.  Sounds pretty global to me. 

Boeing operates in three main segments: Commercial Airplanes, Integrated Defense Systems and Boeing Capital Corporation.  Commercial Airplanes and IDS represent the bulk of the company’s revenue and earnings.

Common Sense Test

They make airplanes, right?  Well, yes, and they finance them. And they make Satellites, Fuel Tanker aircraft, Defense systems and a bunch of other stuff.  Although Boeing operates in two major arenas Commercial Aircraft and Defense Contracting, it quickly gets very complicated.  They offer multiple products in both segments, the accounting can be very difficult to understand and the skill sets involved in commercial aircraft v. military are significantly different.  At the highest level, this company makes sense.  But trying to follow the cash through the financial statements is likely to be impossible for an individual investor like me.

The Bear Case:

Boeing suffers from three major headwinds:

1. Rising fuel prices are impacting airline’s profitability.  Many airlines may be delaying purchases due to rising fuel costs and the impact on their cash levels available for investment in new planes.
2. The credit crunch may decrease the ability of airlines to finance purchases of new planes.
3. They have delayed the launch of their 787 Dreamliner.  Originally scheduled to start shipping at the end of 2008, this major update to their line has been delayed until early 2009.

All of these issues have combined to weigh on Boeing stock price, sending it from a high of $104 down to a recent low of $65.

Next time, I'll share the rest of my analysis of the Boeing Company.  See you soon!