FT.com
Bullish Boeing
Wednesday October 24, 4:40 am ET


For the last five years Boeing (NYSE:BA), which will report third quarter numbers on Wednesday, has flown. Its shares have almost quadrupled since mid-2002, and its new midsize long-distance passenger jet, the 787 Dreamliner, is the fastest selling commercial aircraft in history. In 2009, the group should deliver more than twice the number of planes it did in 2005. Meanwhile the traditional question of how Boeing is doing relative to its only commercial aircraft competitor, Airbus, seems almost redundant. The European plane maker is the wrong side of the dollar, two years late with the A380, its flagship super-jumbo, and struggling to restructure during an insider trading investigation.

Plane orders at Boeing this year have reached 893, pointing to a total for 2007 not that far off last year's record of 1044. Projections for passenger growth, combined with the structural need for quieter and more efficient modern jets suggest healthy long term prospects. In addition, the US airlines are running ageing fleets and have not placed orders of any significance since the last downturn after 9/11.

The defence business, which contributes half of sales, is not doing badly either. Management aims to move profit margins into double digit figures in 2008. With more than 90 per cent of its business coming straight from the US government, it benefits from the remarkable growth in military spending. Winning the $20bn next generation tanker aircraft contract could provide a further boost next year.

Still, the share price already anticipates a healthy dose of optimism. Consensus estimates assume group earnings will grow by a half between 2007 and 2009. Despite two delays on the 787, and a management reshuffle, Boeing trimmed just three planes from its ambitious plan to ship 112 of them by 2009. Any modifications required by regulators could cause a further slip. Guidance for research and development spending also looks low. Flying is still the safest way to travel, but Boeing's shares may not be.