The Boeing Company (NYSE:BA) a buy?
Aerospace and Defense are far from mature with innovation being the bedrock for this industry. I see only growth for those companies leading in this space. Over the past year, this industry’s equity prices have been up and down ending up close to flat for the year. I think that this underperforming industry has an enormous amount of potential for growth in 2019 as trade tensions lighten. Defense contracts being a hefty portion of revenues gives investors in this space a bit more security as well.
Boeing, the largest aircraft manufacturer in the world, was recently devastated by two Boeing 737 MAX crashes within five months, with the most recent accident on March 10 th causing a 15% drop in stock price. There is still litigation concerning these crashes underway that may have a material effect on the stock price (if the 15% drop didn’t already price this in). This drop I believe has given investors a buying opportunity. Boeing has already made many steps to resolve any underlying issues with the aircraft and airlines like Southwest LUV , American AAL , and United UAL are still flying the 737 MAX, confident the problem isn’t systemic.
Over the last two years, BA’s bottom line has risen 53% on a year over year average with increasing margins. In the Net Income BNRI (adjusted net income) graph below you can see that profits have never been higher. This lean operating company has also significantly grown its free cash flow to over $13 billion at the end of 2018 giving Boeing a considerable amount of financial flexibility for acquisition and internal innovation/growth.
Boeing is currently trading at an 18.10 price to earnings ratio (P/E) which is a very reasonable valuation considering this multiple got as high as 30.63 in January of last year before trade tensions hit the fan (shown on the graph below). With Boeing being the US’ largest exporter its valuation got walloped when the “trade war” with China began. Every day the tensions seem to be diminishing, with a deal looming on the horizon I am confident that a resolution is near. Getting in before this multiple adjusts up to pre-trade war levels could turn out to be a very profitable trade. With lowered multiples and raising EPS, this has placed the continuously profitable company as Zacks Rank #1 (Strong Buy).
Lockheed Martin is Boeings biggest competitor for government aerospace contracts being the largest defense contractor in the world. LMT has a niche portfolio of military aircraft that has won them many government contracts; most notably their F-35 program which is considered their primary growth driver is 20% of total revenue and growing. The F-35 program is incredibly expensive though, and the US government is pressuring them to reduce costs which could negatively affect the bottom line. LMT’s broader portfolio is under intense competition with almost all of their revenue coming from defense contracts. Meanwhile, competitors like Boeing who only have 22% of revenue relying on these contracts have a distinct diversification advantage. These concerns lead me to agree with Zacks Ranks #3 (Hold) for LMT.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
The projected upper bound is: 395.45.
The projected lower bound is: 351.23.
The projected closing price is: 373.34.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 43.0453. This is not an overbought or oversold reading. The last signal was a buy 4 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 34.42. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 12 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -60. This is not a topping or bottoming area. The last signal was a buy 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 13 period(s) ago.
Rex Takasugi – TD Profile
BOEING CO closed down -3.460 at 372.700. Volume was 2% above average (neutral) and Bollinger Bands were 68% wider than normal.
Open High Low Close Volume___
375.000 377.000 372.240 372.700 1,255,565
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 382.20 392.36 359.09
Volatility: 48 36 37
Volume: 3,023,127 1,347,380 971,011
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
BOEING CO is currently 3.8% above its 200-period moving average and is in an downward trend. Volatility is Our volume indicators reflect volume flowing into and out of BA.N at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on BA.N and have had this outlook for the last 7 periods.