Boeing to Acquire ETS Aviation, Shares Up

Zacks Equity Research

The Boeing Company (BA) has agreed to buy UK-based ETS Aviation to improve the day-to-day operations of its customers. The financial terms of the transaction were not disclosed. The transaction is scheduled to close in the second quarter of 2014. This agreement evoked a positive market reaction with the shares gaining a slight 0.43% to close at $132.41 on May 23.

Per the agreement, ETS will supply fuel-efficiency management and analytics software by which airlines can monitor  their fuel consumption and carbon dioxide emissions.  

According to the contract, ETS’ fuel efficiency solutions will become a part of Boeing Edge, the industry’s largest portfolio of integrated services. The acquired business will provide digital solutions that will boost the efficiency and profitability of aircraft operators by optimizing flight operations, maintenance, and crew planning and scheduling.

Boeing always works on maintaining a strong position in the competitive aerospace business. To maintain this position, Boeing will have to provide cost-efficient products as compared to its peers. With this acquisition, Boeing will certainly provide airlines with the necessary tools to reduce fuel consumption, as fuel costs approximately make up 50% of airline operating costs.

Boeing’s constant efforts to upgrade technology to not only provide fuel efficient airplanes but also reliable after-sales services have kept the company’s sales book ticking. Backlog at the end of the first quarter was $439.8 billion, up by $48.1 billion on a year-over-year basis.

Recently, the company reported better-than-expected first quarter 2014 results on the back of robust deliveries. Importantly, the company raised its 2014 forecast for core earnings per share to a range of $7.15 to $7.35, up $0.15 at both ends. The Zacks Consensus Estimate of earnings is pegged at $7.67 for 2014.  

Currently, the company holds a Zacks Rank #3 (Hold). Other stocks worth considering in the same industry include Embraer SA (ERJ), Huntington Ingalls Industries, Inc. (HII) and CAE Inc. (CAE). While Embraer SA holds a Zacks Rank #1 (Strong Buy) Huntington Ingalls and CAE carry a Zacks Rank #2 (Buy).

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