We regularly provide our monthly shortlist of wide-moat companies passing our rigorous 3-step stock selection process exclusive for Seeking Alpha readers, with the November edition about to be published any minute now. It then dropped by nearly 70% in the next eighteen months - mainly due to the financial crash and heavy competition from European rival Airbus.Â, From February 2009, BA stockholders enjoyed a rising price trend until it reached a 58-year high of over $440 on March 1, 2019, despite dips and negative sentiment resulting from its two Boeing 737 MAX crashes.Â. That includes setting up a new space combatant command, forming a new joint agency to buy and launch military satellites, and gathering personnel from the other services and the National Guard, Defense One reported Tuesday. Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The draft report, developed by Deputy Defense Secretary Patrick Shanahan, will be sent to Congress Wednesday. Boeing's defense side of the business further enhances the company's wide moat, resting on similar traits as its commercial arm, namely the enormous entry barriers of the regulated military contracting space, along with highly complex technology and capital-intensive development and manufacturing processes. Biden Vs. Trump Poll: Joe Biden Lead Shrinks As Donald Trump Tops 2016 Vote Share, IBD/TIPP Shows, Here Are Some Big Surprises Coming From Tech Stocks. Made from wood, linen and wire, it was just the start of Boeing’s long history of designing and building commercial and military aircraft. We must add, however, that we firmly believe that the company's current fundamental weakness is a temporary phenomenon, while Boeing is well-positioned to profit from the long-term growth in commercial aviation and the duopolistic nature of the industry. It should be readily apparent by now, that Boeing is a far cry from a "buy and forget" type of holding (prone to a series of pitfalls in both running the business and valuing the company), thus risk-averse investors might look elsewhere for sleep-well-at-night alternatives. I have no business relationship with any company whose stock is mentioned in this article. In the next step, we move on to the EVA framework, examining if the company can consistently create shareholder value, as EVA cuts through accounting distortions and charges for the use of capital. Get 2 months of IBD Digital + Print for only $10.31. The decision to create a Space Force will likely be a huge benefit for companies like United Launch Alliance, a Boeing (BA)-Lockheed Martin (LMT) joint venture, Northrop Grumman (NOC), Raytheon (RTN) and Elon Musk's SpaceX. The Pentagon has reportedly started building the foundations of a Space Force as it waits for approval to create a new military branch proposed by President Trump. EVA Momentum measures the growth rate in EVA, scaled to the size of the business (measured by its sales). Instead of pinpointing any single-year performance, we prefer to look at the long-term trailing averages in EVA Momentum. The Boeing Company was founded in 1916 by William Boeing to capitalize on the fast-growing demand for aeroplanes during World War 1. BREAKING: Dow Closes Down, At Session Lows. Although the tragic implications of this are widely known by now, we argue that management also destroyed a serious amount of shareholder value by the series of ill-timed buybacks. A vaccine is coming. Raytheon Technologies Deepens Cuts As Aviation Sales Plunge, Pentagon Delays This Key Decision On The F-35 — Again, Boeing To Report Another Tough Quarter But Watch For This Sign Of Improvement, Is Raytheon Stock A Buy As Elite Status Fades? Do you want to invest in BA with USD? To report a factual error in this article, multifactor quantitative stock selection model. Read about potential market outcomes post-cure. As a second step, we use Morningstar's valuation system, where analysts create industry and company-specific assumptions, and then all the inputs are used in a discounted cash flow model. Source: Author's calculation based on data from evaexpress.com. Any positive EVA Momentum is good because it means EVA has increased, and it is an indication that it is worthwhile to reinvest capital in the underlying business. ","thumbnailUrl":"https:\/\/www.investors.com\/wp-content\/uploads\/2018\/03\/BA-starliner-vidthumbnail-640x360.png","contentUrl":"https:\/\/content.jwplatform.com\/manifests\/tqOYQVPh.m3u8","uploadDate":"2018-03-16T14:31:00+0000","duration":null,"author":"ALISSA CORAM","publisher":{"@type":"Organization","name":"Investor's Business Daily","logo":{"@type":"ImageObject","url":"https:\/\/www.investors.com\/wp-content\/uploads\/2020\/06\/ibd-logo.png"},"url":"https:\/\/www.investors.com"},"keywords":""}. The single most significant capital allocation blunder of Boeing's recent past has been its excessive, ill-advised buyback spree, retiring ~200M shares and reducing the number outstanding by ~25% between 2013 and 2018, for a total cost of over $40B. Overall, Boeing's buyback was anything but opportunistic during the upcycle of the past decade, as management recklessly tried to fulfill the "100% FCF return to shareholders" mantra at all costs. Your Uphold account can be used to make payments to vendors, send money to friends on the other side of the world, and more. Aerojet Rocketdyne (AJRD), which makes propulsion systems for the military and commercial sectors, surged nearly 22% after reporting strong earnings late Monday. While the near-term cash flow figures remain at severely depressed levels, Boeing's management sees a path to positive FCF in 2021 (subject to the 737 MAX returning to service), by reducing inventory and ramping up production. Check out this free infographic for 9 buying and selling rules that help you trade like a pro! Boeing stock price. Boeing went on to develop a range of famous planes, including the 314 Clipper Flying Boat used in World War 2, the 707, 727, 737 and the legendary 747. That is, whether it produces more cash from ongoing operations than it consumes, and not go deeper into debt or dilute current stockholders. The company's defense segment, on the other hand, is holding up steadily, providing a critical layer of stability for Boeing amid the current operating challenges, with a continued positive outlook marked by a stable defense spending forecast relative to GDP going forward. The 747 was the aircraft that opened up the world to everyone in 1969, allowing people to fly to faraway destinations more cheaply than ever before. With respect to switching costs, Boeing benefits from a large and established installed base of defense products (with government spending accounting for ~50% of Boeing's service revenue), while a major fleet update which could blackball Boeing seems highly unlikely at this stage. Which financial companies are the most trusted according to investors? We want to see a stock in the upper-right hand corner of this heat map, but we are more concerned with the Quality Score, as we believe that over the long-run, we are better off with a truly exceptional business bought at a fair price, rather than a fair company bought at an exceptionally attractive price. Our prime historical valuation indicator in the EVA world is the Future Growth Reliance (FGR), which is the percent proportion of the firm's market value that is derived from, and depends on, growth in EVA. In order to reflect all moving parts within the business, the analyst firm also evaluates the level of uncertainty with all the stocks they cover. While the average Quality Score of 72 underpins Boeing's favorable competitive position throughout economic cycles, the metric is currently pushed to unprecedented lows due to both the EVA Margin and Momentum taking a nosedive, coupled with a debt-induced increase in vulnerability. 9:12 AM ET After all our due diligence, we turn to the PRVit model for a final judgment of the overall attractiveness of a stock. Following our recent coverage of Apple (AAPL), we decided to assess another iconic wide-moat company, Boeing (BA), to see whether the aerospace juggernaut fares favorably in our shareholder value focused framework, in spite of its latest operating turmoil. The information and content are subject to change without notice. I am not receiving compensation for it (other than from Seeking Alpha). A noteworthy exception has been Boeing's 2018 acquisition of KLX (a leading aerospace parts distributor) for a total consideration of $4.25B (including the assumption of $1B in debt), which was rather a bolt-on transaction to strengthen its Global Services segment, in an effort to triple sales from services to about $50 billion over 10 years. Before we do that, however, let's jump into what makes Boeing an interesting candidate today. If you liked this analysis and don't want to miss any of the upcoming articles by our evidence-based stock selection process exclusive for SA readers, please scroll up and click "Follow" to be notified of future releases. We suspended our dividend and terminated our prior share repurchase authorization. As a consequence, especially low-cost carriers like Southwest (LUV) or Ryanair (RYAAY) are sticking to one plane type in their entire fleet. X I am not receiving compensation for it (other than from Seeking Alpha). Aside from a few price drops, the Boeing stock price went from under $6 in 1980 to over $100 in September 2007. You can then fund your account with your debit card, credit card, bank account, or crypto deposit. Lockheed was up 1.8%, Northrop rose 1.9%, and Raytheon jumped 2.4%. In the meantime, Boeing is making steady progress towards the safe return of the 737 MAX to service, working closely with the FAA and other global regulators, with expectations to resume deliveries during Q4 2020. Space Warfare: Why The U.S. Is So Vulnerable, Despite SpaceX's Wins. It then dropped by nearly 70% in the next eighteen months - mainly due to the financial crash and heavy competition from European rival Airbus. Despite the daunting performance of the recent past, Boeing's strong cash generation capability allows it to pass our first criteria regarding stability (although management's accountability will highly depend on their ability to deliver on their promise going forward).