U.S. Markets open in 9 hrs 12 mins

Boeing Gets Orders Plenty

Zacks Equity Research

The Boeing Co. (NYSE:BA) is flying high on the back of rising demand for its new fuel-efficient commercial planes. The aerospace giant won a contract, valued at $3.9 billion at list prices, from GE Capital Aviation Services (“GECAS”), the commercial aircraft leasing and financing unit of General Electric Company (NYSE:GE).

This big order consists of 40 medium-haul passenger jets, evenly split between the two models, the 737 MAX 8 and the Next-Generation 737-800. Boeing had indeed booked this order from GECAS last year. It had been listed as an unidentified buyer on Boeing's website.

GECAS is considered to be the world's largest aircraft leasing company and this collaboration further underpins the value of the Next-Generation 737 and 737 MAX in the leasing market. Boeing will introduce the upgraded versions of these two 787 variants with new engines in 2017 particularly to save fuel.

The 737-800 comes in with the new Boeing Sky Interior which is the latest in a series of enhancements for both airlines and passengers. This variant has been Boeing’s bestseller in the single-aisle market. The single-aisle airplane is popular because of its wide market base, performance efficiency and lower operating cost.

The fourth generation of the 737 family – the 737 Max – is a premier aircraft from Boeing’s portfolio and sees brisk demand in the single-aisle market for its fuel efficiency and low carbon dioxide emissions. Powered by the Commercial Fan Motor (“CFM”) International LEAP-1B engines, the Advanced Technology winglet of this airplane also enhances performance. Boeing’s 737 MAX competes with its European rival Airbus’ A320 neo. To date, 32 customers have ordered 1,763 MAX airplanes.

In Oct 2012, GECAS ordered 75 Boeing 737 MAX jets and 10 737-800s with an option for up to 15 additional 737-800s. With the new order, the GE aircraft unit has ordered 638 airplanes from Boeing. This comprises 737s, 747s, 757s, 767s, 777s and 787s. To date, GECAS has been delivered 459 of these airplanes.

The single-aisle aircraft will continue to dominate, particularly in the emerging markets where the middle-income passenger count is expected to go up. The single-aisle fleet’s share in the global market is expected to increase from 14% to 20% by 2032. This will certainly keep Boeing’s cash register ringing.

However, the company’s main rival Airbus poses a stiff challenge. European aircraft maker Airbus beat Boeing with record sales and orders in 2013. However, in terms of finished airplanes delivered, Airbus came second to Boeing.

Boeing currently retains a Zacks Rank #2 (Buy). Other well-placed operators in the aerospace and defense sector include Huntington Ingalls Industries (NYSE:HII) and Lockheed Martin Corporation (NYSE:LMT), both carrying the same rank as Boeing.

Read the Full Research Report on BA
Read the Full Research Report on LMT
Read the Full Research Report on GE
Read the Full Research Report on HII

Zacks Investment Research