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Boeing, Air Lease Corporation Strike $9.6B Deal for 78 Jets

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Boeing, Air Lease Corporation Strike $9.6B Deal for 78 Jets

Boeing (BA) receives firm orders from Air Lease Corporation for its three 787-9s and 20 737 MAX airplanes.

The Boeing Company BA recently announced that it signed a deal involving orders and commitments for delivering up to 78 Boeing airplanes to Air Lease Corporation AL, at the 2018 Farnborough International Airshow. The deal worth $9.6 billion at current list prices included 75 737 MAX 8s and three 787-9 Dreamliners, thereby expanding Air Lease Corporation’s 737 MAX portfolio to 213 jets.

Air Lease Corporation has currently placed firm orders for three 787-9s and 20 737 MAX airplanes. The subsequent 55 737 MAX airplanes are provisional commitments until both companies finalize them into firm orders. In total, Air Lease Corporation placed orders and commitments for 361 Boeing airplanes since 2010, including 288 737s, 21 777s and 52 787 Dreamliners.

A Brief Note on 737 MAX

The 737 MAX incorporates the latest CFM International LEAP-1B engines, advanced technology winglets, Boeing Sky Interior, large flight deck displays and several other features. These features allow this family of jets
to offer the greatest flexibility, reliability and efficiency in the single-aisle market.

The 737 MAX is the fastest-selling airplane in Boeing’s history, accumulating more than 4,600 orders from 100 customers worldwide.

What’s Favoring Boeing?

Boeing frequently witnesses a huge demand for its commercial aircraft on a global scale. In the Farnborough Airshow itself, it clinched orders worth $8.8 billion to deliver 75 737MAX jets to Jet Airways. Moreover, last month, Boeing secured a $5.6 billion deal from Bamboo Airways for delivering 20 787-9 Jets.

With the 737 fleet leading the single-aisle jet space, we may expect the company to win more such orders like the latest one, for this fleet in quarters ahead. This, in turn, will add further impetus to Boeing’s Commercial Airplanes unit, which posted revenues of $13.65 billion in the first quarter of 2018, reflecting a year-over-year rise of 5%.

On the other hand, Boeing remains focused on improving 787’s cash generation and profitability driven by favorable delivery mix, supplier step down pricing and efforts to drive internal productivity and supply chain management.

Rising Demand to Aid Boeing

Boeing recently raised its 20-year forecast for jetliner demand by 4.1%. Per its latest market outlook, the world will need 42,730 new planes, worth $6.35 trillion, between 2018 and 2037. The company expects cost- effective single-aisle jets to be the major demand driver, accounting for 73.4%. This translates into worldwide demand for 31,360 single-aisle jets, worth $3.48 trillion.

Moreover, Boeing expects widebody jets to be a strong driver behind demand growth, comprising 18.9% of the total projection, translating into worldwide demand for 8,070 widebody jets, worth $2.48 trillion, over the next two decades. Boeing, being of the largest aircraft manufacturer, is surely going to benefit from such worldwide demand forecast for commercial aircraft and we may expect to witness more such delivery orders for the company, in days ahead.

Price Movement

Boeing’s shares have rallied about 71.4% in a year compared with the industry’s growth of 32.3%. The outperformance was primarily led by the growing and robust worldwide demand for its commercial aircraft and military jets.

Zacks Rank & Key Picks

Boeing currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are Northrop Grumman NOC and Textron Inc. TXT.

While Northrop Grumman sports a Zacks Rank #1 (Strong Buy), Textron carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman delivered an average positive earnings surprise of 13.87% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 6.54% to $16.61 in the past 90 days.

Textron came up with an average positive earnings surprise of 16.64% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 3.60% to $3.16 in the past 90 days.

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Air Lease Corporation (AL) : Free Stock Analysis Report
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