BA – Market expectations are for continued Uniform ROA expansion, but management has concerns about their product mix, new aircraft demand, R&D, and production

March 1, 2019

  • The Boeing Company (BA:USA) currently trades above recent averages relative to UAFRS-based (Uniform) Earnings, with a 21.6x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about product mix, midsized airplane demand, their long-term R&D strategy, and airplane production
  • Specifically, management may be concerned about their product mix between the 777 and 777X, and may lack confidence in their ability to sustain 777 orders, margin growth, and strong 2018 performance. In addition, they may be overstating commercial air traffic growth, the demand for new midsized airplanes, and their production capabilities. Moreover, they may have concerns about changes in their long-term R&D strategy and spending, and their ability to maintain 787 operating cash flow. Furthermore, they may lack confidence in their ability to strengthen vertical capabilities and manage production systems. Finally, they may be overstating the value proposition of fuel-efficient planes and may be downplaying lingering supply chain headwinds

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