The Boeing Company (BA): It Is Back With a Future

It’s really unfair to say that The Boeing Company (NYSE:BA) is back, when it never really left.

It’s true that The Boeing Company (NYSE:BA) has had some problems recently. The flap with the batteries in the 787 Dreamliner was the sort of news that public relation’s disasters are made from: high profile, good imagery for the networks, and an issue (air safety) that always grabs the public’s attention. As a former newsie, I understand why the media hammered the company for a month.

That led to the company’s most prominent product being pulled off the shelves and out of the skies for more than 2 months. But predictions of The Boeing Company (NYSE:BA)’s doom failed to come true. The fact is that The Boeing Company (NYSE:BA) is involved in a number of different market spaces, including commercial and military aircraft and even aerospace development. One short term glitch for one product – even if that product is very visible to the public – isn’t enough to derail a firm like The Boeing Company (NYSE:BA).

Problems? No…no problems

Or yes, problems. But note the effect that the grounding of the Dreamliner for a few months had on The Boeing Company (NYSE:BA)’s share price. With the 787 just about set to get back in the air, shares in Boeing are up 17.66% since the first of the year. Even after the drop Boeing experienced on the bad Dreamliner news, this beats the gains of the S&P in the same time period.

The company has been backstopped by both its defense and space divisions, sure, but there have also been some acts of faith made by commercial aircraft buyers. Ryanair Holdings plc (ADR) (NASDAQ:RYAAY), the Irish airline, has shown faith with its order of 175 smaller 737 jets from Boeing for more than $15 billion. Even further, the CEO of Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) – the outspoken Michael O’Leary – called the media coverage of the Dreamliner issue “unfair commentary” and claimed he’d have bought Dreamliners instead of the 737 if they were as cheap.

So even with the high profile issue, Boeing is still doing well and speculators have been buying it up as it has gone through the media wringer. Another positive sign is that the company just announced a $1 billion expansion of its Dreamliner assembly plant in my home of Charleston, SC. It’s never a good idea to give up on a well-run and profitable company just because of some short-term problems.

More than just aircraft

Boeing has competition in the aircraft industry. Airbus is the most well-known competitor, but investors shouldn’t forget the smaller Embraer SA (ADR) (NYSE:ERJ). mbraer SA (ADR) (NYSE:ERJ) is a Brazilian firm that makes aircraft that are mostly smaller than those made by Boeing and Airbus. Still, the company has a fine history of landing contracts and building value for investors. Since the first of the year, its market cap has grown 18.87%, and its operating margin last year was a fine 5.64%. The only real worry for Embraer investors is that the Brazilian government holds veto power over company actions, as Embraer was born of a government monopoly that was sold off.

Outside the commercial aviation industry, Boeing contends with some of the very largest firms in the world. Lockheed Martin Corporation (NYSE:LMT) is a company that can complicate Boeing’s life as a competitor. While not a maker of commercial aircraft, the company is one of the best at making military aircraft and other aerospace technologies. Boeing fights within its own weight class with Lockheed Martin Corporation (NYSE:LMT) – and, in fact, has a market cap more than twice Lockheed’s – but Lockheed is more tightly focused on the defense and aerospace markets. This focus gives Lockheed a leg up on building relationships and closing sales, and it shows in the firm’s performance. Last year’s operating margin was 9.4% and its shares have been on a roll, gaining 10.36% since the beginning of February.

Prepare for boarding

There is simply little reason for a sensible investor to avoid Boeing. The firm’s numbers look good, with a P/E of 16.99 and last quarter’s operation margin coming in at 7.30%.  Even with this quarter’s troubles it has outperformed the S&P by over 4%. The issue with lithium-ion batteries was a tempest in a media teapot. The only lasting effect it had was on the investors who saw the media storm, dropped out, and ended up losing value while people with more faith in Boeing either stayed in or increased their stake. Remember, if you had a thousand shares of Boeing on Jan. 1, 2013 and held them, you’d have gained $13,210 in value over the last three months. Think about that the next time some talking head tries to panic you into making a market move.

The article Boeing’s Back With a Future originally appeared on Fool.com and is written by Nate Wooley.

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