BA – Market expectations are for continued Uniform ROA expansion, but management has concerns about their T-X program, bottom-line volatility, and their investments

June 19, 2019

  • The Boeing Company (BA:USA) currently trades below recent averages relative to UAFRS-based (Uniform) Earnings, with an 18.5x Uniform P/E. However, even at these levels, the market has bullish expectations for the firm, while management has concerns about the potential of their T-X program, volatility in their earnings and margins, and their investments in innovation and growth
  • Specifically, management may lack confidence in their ability to maintain strong new order levels, and to begin flight testing their 777X program in 2019. Moreover, they may be exaggerating the potential for T-X to be a franchise program for the Air Force through most of the century, and may have concerns about the strength of their value proposition for their global customers. Additionally, they may lack confidence in their ability to continue driving organic growth through investment, particularly to accelerate their pace of progress on their key enterprise growth. Furthermore, they may have concerns about their ability to maintain a clear and consistent focus on their objectives, and may be exaggerating the potential investment capability within their T-X program. They may also be exaggerating how close their T-X jets are to being production-ready, and how focused they are on executing on their 737 deliveries and backlog. In addition, they may have concerns about volatility within their bottom-line and margins quarter-to-quarter, and about their planned long-term investments. Finally, they may lack confidence in their ability to complete their remaining buyback authorization, and may be exaggerating their flexibility to invest in innovation and growth opportunities

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