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Boeing's (BA) 737 Model Boosts YTD Commercial Deliveries

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Boeing's (BA) 737 Model Boosts YTD Commercial Deliveries

Boeing's (BA) commercial airplane sector continues to perform well, given strong contribution from its single aisle 737 model.

The Boeing Co. BA delivered 190 airplanes in the third quarter of 2018, marginally lower than 202 deliveries in the year-ago quarter. However, on a year-to-date basis, deliveries touched 568 compared with 554 airplanes delivered in the year-ago period.

The 737 model continues to be a major pillar of Boeing’s strength in the commercial airplane sector. Year to date, the company delivered 407 airplanes from its 737 model compared with 381 deliveries in the year-ago period. Boeing is on course to meet its commercial airplane delivery target for 2018, which is expected in the range of 810-815. Boeing expects the commercial airplane segment to generate within $59.5-$60.5 billion in 2018.

The commercial airplane market is showing gradual signs of improvement, as reflected in the order books of the commercial airplane manufacturer. Net order received by the company in the first nine months of 2018 was 631 airplanes versus 529 in the year-ago period.

Defense Deliveries & Budget

During the quarter, the company delivered 25 items to the defense department, including helicopters, fighter jets and satellites. However, year-to-date defense deliveries were 66, much lower than the year-ago level of 131 items.

Fiscal 2019 defense budget is fixed at $717 billion. Boeing along with Lockheed Martin Corporation LMT are expected to benefit from the strong U.S. defense budget. Both the companies have a wide presence in the defense space, given their wide assortment of products.

Long-Term Outlook for Commercial Airplane

The demand for commercial airplanes is expected to double in the next two decades, per long-term outlook provided by Boeing. Per the outlook, the demand for new planes will touch 42,730 by 2037. The single aisle segment is expected to witness maximum growth, with a demand of 31,360 airplanes.

The total value of the commercial aeroplane market, with commercial airplanes and services, will touch nearly $15 trillion. We expect that Boeing will be a major player with its 737 family, a premier single-aisle commercial aeroplane.

Boeing’s dominance in the international commercial market will be challenged by Airbus Group’s EADSY A-320 model.

New Developments in Commercial Space

At present, the commercial aircraft market is a duopoly, with Boeing and Airbus being the primary operators. However, new companies are being formed to develop new aircrafts for curbing the dominance of these two major operators.

The China and Russian joint venture, The China-Russia Commercial Aircraft International Corporation (CRAIC), is working to develop a wide-body, long-range aircraft, which will likely provide serious competition to the existing players.

Price Movement

In a year’s time, Boeing has returned 47.4% compared with its industry’s rally of 21.9%.


Zacks Rank & A Key Pick

Boeing currently has a Zacks Rank #3 (Hold). A better-ranked stock from the same industry is Huntington Ingalls Industries, Inc. HII, currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls delivered an average positive surprise of 9.48% in the last four quarters and its long-term earnings growth is pegged at 15.0%. The Zacks Consensus Estimate for 2018 has moved up 1.5% in the past 60 days to $17.24.

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