For a time, it seemed as if The Boeing Company (NYSE:BA) was in big trouble. Its new commercial airline product, the 787 jetliner, was grounded, and the U.S. Government sequestration threatened to cut into its defense segment’s profits. But, those fears are yet to materialize into something terrible.
The result? A much higher stock price. The Boeing Company (NYSE:BA) shares hovered around $75 earlier this year on these fears. Now, the stock is up to $100 in a very short time.
The 787 has been cleared for flight again. That’s huge because of how much the 787 should drive growth for The Boeing Company (NYSE:BA) over the next couple of years. The Boeing Company (NYSE:BA) has received almost 900 orders for the 787, and airline execs didn’t really cancel any orders due to the battery problems that caused flights to be grounded.
The chart below shows the jump in revenue in 2012. This helps illustrate the importance of the 787 on The Boeing Company (NYSE:BA)’s future. Investing in The Boeing Company (NYSE:BA) can be risky since the 787 issues are still very new, but the airline companies have given the 787 glowing reviews.
The one issue that still needs to be addressed is just how much the sequestration will impact Boeing. What is even more important is how future defense spending will be handled by the government. Unfortunately, there is no good way to know what future congresses will do with the budget. However, we can feel relatively comfortable that defense spending isn’t going away altogether any time soon, given the continuing instability in certain key countries.
If Boeing’s risk and big stock price rise has you scared, perhaps a defense company with a bigger dividend works for you: Lockheed Martin Corporation (NYSE:LMT). This company had been restrained for quite some time on the fear of government defense spending cuts. But lately, the stock has run much higher as these fears subside.
The fears over defense spending cuts are very real. However, much of those fears were already priced in the stock. Lockheed Martin Corporation (NYSE:LMT)’s management was well aware of the potential cuts and had already crafted a plan to cut costs if sequestration was to take place due to lack of congressional action on the budget.