Boeing Undervalued With or Without Disputed Tanker Contract

6/17 - "Perhaps the largest problem is Boeing's customers, as airline industry misery continues Wall Street is concerned it will spill over to the manufacturers of airplanes, like Airbus and Boeing, as orders are cancelled left and right. Worldwide, airlines expect to lose somewhere between $2.6 and $6 billion dollars in the current year. No matter how good those Dreamliners may be at miles per gallon, the impact of lost budgets will hit Boeing. The airlines need the more fuel-efficient planes but can't afford to purchase them."

"There are just too many concerns with the U.S. economy to allow Boeing shares to trend upward, so how low can they go?

Today Boeing shares are just $3 away from a new 52-week low, don't hold your breath. "

6/5 - "After processing the latest news, 2008 and 2009 estimates now center around $5.96 and $6.80 meaning BA shares are trading at just 13.1 times this year's and 11.5x 2009 projections. Value Line sees 3- 5 year EPS of $9.00 once the new Dreamliner aircraft is fully in delivery mode...Value Line sees a long term multiple of 15 as typical. I think that's reasonable for Boeing based on sustainable earnings power...Fifteen times this year's estimate of $5.96 would bring BA shares back to $89.40 by year end and to $102 by December 2009."

"Value Line rates Boeing's financial strength at 'A++' and gives them a #1 rating [their highest] for Safety. Government subsidized Airbus is the only true competitor large enough to ever threaten Boeing's place in the commercial airline business. There clearly seems to be room for both, yet huge barriers to entry for any new producers."

"For option savvy investors here are two relatively low-risk option combinations to consider:"

6/19 - "We believe that $130+ oil and weakening traffic may cause some of Boeing’s airline customers to take an updated view of their growth plans, or their ability to recapitalize. Coupled with residual 787 risk, we think that Boeing’s multiple will continue to feel some pressure. As a result, we prefer to await tangible progress on 787 and a clearer indication of airline health before becoming more positive."

"Delivery guidance points to peak, or a plateau at least. Boeing has introduced a target of 505 deliveries in 2009, vs. 480 in 2008: the delta consists of the 25 initial 787s (at 0% margin). We think this is a key indicator, since BA has ample backlog to make further rate increases on its core products and to match Airbus, which aims to ramp from 34 single-aisle per month now to 40 by the end of 2009; Boeing is sticking on 31. We applaud the firm’s discipline, as production swings can be harmful, but we mirror its hesitation in forecasting a further ramp from here."

"787 remains a risk, costs mount. Boeing has now set itself a more achievable schedule for the 787 program, but the proof for investors will be in the pudding, after three credibility-sapping delays. The plane is moving towards power-on and first flight, but the potential for further supply chain disruptions as production increases is real, despite the revised schedule (viz A380). We estimate delay-related costs of $4bn, to be spread over the program block."

"BA trades at 10.7x CY09E P/E, approximately in line with its commercial aerospace peers. Our target price of $79 implies a multiple of 11.3x CY09E EPS."