BA Stock Analysis – Is Boeing Stock A Buy?

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How's it going today guys and welcome Back to stock radar I know we have a Bunch of new members here I want to Welcome you guys to stock radar and Thank you guys so much for making the Decision to join this membership group Make sure you check out all the other Videos we have done so far we have two Courses in here as well and a bunch of Different bonus videos and I have a lot More courses coming that I'm working on Now and I've been talking with different Experts out there that are going to be Producing courses for this group as well So far it's going to be one on technical Stock analysis and one on trading Options and the course on technical Stock analysis should be coming sometime In April but I'll definitely keep you Guys posted on that but anyways in this Video you guys voted on Boeing it is one Of my favorite stocks one of my top Picks for 2018 and I'm really looking Forward to talking to you guys about This particular stock here and as always Let's go ahead and start with some of The basics so first of all as you know The company is Boeing they trade under The symbol BA this is an old company They're 101 years old it's a company That is on the Dow Jones Industrial Average it is what most would call a Blue chip stock it's a well-established Time-tested well-established I mean a

Well-established time-tested financially Stable company it's been around for a Very long time they have a long track Record of dependability I still would Consider this to be an aggressive growth Stock based on the way this company has Been performing over the last five years Or so they have a price to earnings Ratio of 28 a market capitalization of 192 billion they are a dividend stock They currently pay a dividend of 2.1 Percent and they've been paying Dividends for 76 years but they've only Been growing that dividend over the last Six years so while they do have a long History of paying dividends the actual Growth streak is not very good because They had flat dividends from 2009 to 2011 as a result of the market crash and Financial crisis they were not able to Grow that dividend during that period of Time but they do have a very long History of paying dividends so what do We know about Boeing Boeing is the World's largest Aerospace company They're also in involved with defense Security and space so as you can imagine Boeing operates in two different Business segments that's commercial Airplanes and then defense security and Space and one of the greatest things About Boeing we're going to talk about This later on is that they have very low Competition in the business segments

They operate in so when it comes to the Commercial airplanes they're producing Their only competitor is Airbus so it's Between Boeing and Airbus as far as who Has the most market share these are Really the only two main competitors in That space and when it comes to defense It's between Boeing and Lockheed Martin So these companies have a very Comfortable area they're operating in And there's not a lot of competition and It's not a business a lot of people Would want to get into but we're going To talk about that more later on when we Talk about the moat or barriers to entry Associated with Boeing so as I'm sure You guys know Boeing stock has performed Very well over the last three years and Primarily this is due to three things There are three things that benefit Boeing greatly number one is low fuel Prices when fuel prices are lower you're Going to see more people traveling and Airlines are going to have more money to Upgrade their airplanes and they're Going to be buying more Boeing aircrafts Number two is more defense spending as We know we're going to talk about this Later on but we are seeing an increase In the defense spending budget under the Trump Administration and number three is Increased airline travel and that also Ties in with lower fuel prices when it's Less expensive to travel you're going to

See more people traveling and also when We are in a good or prosperous economy People have more money and they're going To be doing more vacationing and Traveling in general so we've been Seeing all three of these things happen Over the last couple of years and this Has been a major Catalyst for why we Have seen Boeing stock take off the way That it has so now that we have a bit of A background on Boeing let's go ahead And move to the pros and cons of Investing in this stock and first of all One of the major pros of investing in Boeing is that you're getting Global Market exposure this is a company that Has its hands in all kinds of different Markets they're huge in China they're Huge in Emerging Markets they're huge in North America but the main thing here is That by investing in this company you're Getting exposure to all these different Global markets Boeing isn't just selling Their airplanes and aircrafts and Defense systems just in the United States they're selling these all over The world in fact we're going to talk About China later on that's actually a Con on the list here talking about Potential tariff backlash but China is One of the largest customers of Boeing Aircrafts so this is a company that has Its hands and all kinds of different Global markets and as a result you're

Getting Global Market exposure and You're well Diversified through one U.S Company so that is a major Pro here and Something I always like to see in a Company I'm investing in is that they Have exposure to Global markets second Of all one of my favorite things about Boeing is the fact that they operate on A backlog so because these aircrafts They're producing and the actual defense Uh helicopters and whatnot things like That are so expensive to produce they're Not just going to make one and then post It for sale online they're not just Going to make a Boeing 747 and put an ad Up on Craigslist and say a for sale they Already know that somebody is buying That they already have a purchase order Before they are producing anything like That because these are such expensive Items so as a result they operate on a Backlog and they don't have any Inventory so they're only building a Boeing aircraft or a helicopter or one Of those things that they're offering When somebody has already ordered it and That is a very appealing business model Because they are not sitting on Inventory and they know exactly how much Of the good or service to produce in This case it's going to be their Aircrafts another Pro for Boeing stock Is that in 2017 Boeing spent 9.2 billion Dollars buying back shares that's always

A good thing to see when a company is Buying back shares from the market first Of all it means they are willing to put Their money where their mouth is and say That that share price is at a good value Otherwise they will be wasting money by Buying it back if they knew that share Price was inflated and second of all it Is going to lessen the number of Outstanding shares and that's going to Increase the price over time because There are less shares out there Available to the public so it's always Good to be seeing a company being Generous with the share BuyBacks and That is something we are seeing here From Boeing another Pro for Boeing is That 2017 saw record high orders filled In record high backlog which means Boeing is poised to do very well in 2018 And going forward as they have a very Strong backlog and they had a record Year as far as the number of orders Filled and to tie into that they've also Increased their production capacity of The Boeing 737 so it's good to see that Boeing is making investments in their Production they've increased their Production capacity to meet up with that Increasing demand for that particular Aircraft and it's just good to see that They have a record high backlog that Means they are likely going to continue To do well going forward another Pro for

Boeing is the fact that the aircrafts And the products they are producing Today are more fuel efficient and that Is definitely a plus for airlines that They're looking to save money it might Be cost effective to upgrade their aging Or old aircraft because they are less Fuel efficient and as I'm sure you know We have seen low oil prices and low fuel Oil prices over the last couple of years So they've been consistently low there's Really no talk of oil prices or fuel Prices climbing much in the next few Years they're probably going to be flat Like this for a while and this has been A plus for Boeing because as the fuel Prices are lower it is less expensive to Travel more people are traveling and as A result Airlines have more money in Their pockets to upgrade their Fleet and So that is one reason why we have seen Boeing perform so well over the last Couple of years is because we have seen Relatively low oil prices and fuel Prices now one of the biggest Pros for Boeing is the result of Donald Trump and His Hefty defense budget he is spending A lot more on defense and two companies Primarily benefit from this defense Spending that is Lockheed Martin and Boeing so we know that in 2017 to 2018 The defense spending budget increased 18 Percent so what two companies do you Think are going to benefit most from

That bump in defense spending it sure as Hell going to be Boeing and Lockheed Martin so I would say for as long as we Have a Republican president in the Office we are going to see these stocks Do very well as Republicans tend to Spend more money on defense and we know That during the Obama Administration There were significant cuts on the Defense spending and that hurt companies Like Boeing but as long as Trump is in Office I think we are going to see a lot Of money being directed towards defense Spending and that is going to largely Benefit Lockheed Martin and Boeing as a Result another Pro for Boeing is that we Saw a 7.5 percent increase in global air Traffic passenger demand from 2016 to 2017 so as a result of people having More money for vacationing and traveling And low fuel prices we saw a 7.5 percent Increase in the number of passengers Traveling globally and again that is why We saw a lot of these Airline stocks Performing very well over the last few Years and when the airlines are Performing well you're going to see Boeing performing well as a result Because they have more money to be Upgrading and updating their Fleet and This ties into that as well but because The airline industry has been in favor Boeing has been in favor as a a result And we also know that there is political

Favor here with the Trump Administration And the Republican house there's going To be more money directed towards Defense spending and the other Pro as we Mentioned early on is that Boeing is Pretty much involved in two duopolies Whether it is the duopoly in commercial Airlines with Airbus and Boeing or with Defense between Lockheed Martin and Boeing it's a very comfortable spot for These companies to be in so those are The pros for Boeing stock as I'm sure You guys know I've talked about this Before it is one of my favorite stocks One of my top picks for 2018 but why Would you need to worry about investing In Boeing stock right now I pretty much Have four cons and some of these are Pretty big issues the first one the main One is that this is a very cyclical Business for two different reasons first Of all it depends on who is in office as We said already Republicans are Typically spending a lot more money on Defense while Democrats are cutting the Defense budget and that is going to Increase and decrease the money being Directed towards companies like Boeing And Lockheed Martin that is a big piece Of their business as government spending Primarily from the United States and so If you see a Democrat voted in you're Probably going to see Boeing stock and Lockheed Martin stock tumble because

They know that this President is going To be directing less money towards Defense spending the other side of this Is that the airline industry itself is Cyclical in nature due to the fact that When people have extra money sure they Can afford to go travel they can go to Disney World and take their family out On vacation but when people don't have Enough money they're not going to be Traveling and as a result there's going To be less air traffic and there's going To be less people going to Airlines and Traveling and as a result the airlines Are going to be hurting and they're not Going to be spending money upgrading Their airplanes and doing things like That and as a result that's going to Hurt Boeing and then the other side of This has to do with fuel prices so when We see fuel prices climb that's going to Hurt the airlines as well and hurt Boeing as a result so there are three Major components that can hurt Boeing That are very cyclical in nature it has To do with the political favor it has to Do with whether or not people have extra Money to be traveling and it also also Has to do with the fuel prices and all Three of these items can operate Independently so of course all three of These items are right now in favor for Boeing but this might not be the case in One to two years you just don't know

What's going to happen with things like Fuel prices or whether or not we will See Trump be elected again or we'll see Somebody else in office or whether or Not this bull market and prosperous Economy will continue the other con for Boeing stock is that this stock is one Of the Darlings of Wall Street right now The stock is up about 84.5 percent over The last year so while it is a fantastic Investment and they do have a lot of Growth potential a lot of that future Growth has been priced in today because So many people are bullish on Boeing There's a lot of people buying up Boeing Stock and that has really elevated that Share price and that has pushed that PE Above its peers and that is one of the Other cons that I have for Boeing stock So Airbus has a p e of 25.7 while Lockheed Martin has a price to earnings Ratio of 25.4 and we know Boeing has a PE of 28. so of those three companies Boeing is the most expensive and I do Believe that a lot of that future growth A lot of that high backlog and all these Good signs for Boeing a lot of that is Priced in today and that is one of the Major cons for this stock is it is very Expensive at this point in time because So many people are bullish on Boeing and Then the final con I have for Boeing Stock is that they are currently tied up In what could be a sticky situation with

Trump imposing tariffs on China he's Talking about imposing 60 billion Dollars worth of tariffs unimported Chinese goods and the problem with that Is we might see a trade war with China As a result because as we said Boeing is A company that is involved in global Markets and one of the largest Purchasers of Boeing commercial Aircrafts is China so if we start Imposing tariffs on Chinese Goods that Are imported they may decide to stop Buying Boeing aircrafts or start Charging tariffs or putting taxes on Those so aircrafts are the top U.S Export to China and if we start imposing Tariffs on China his Goods China may do The exact same thing with U.S good and Start imposing tariffs on these aircraft That are being exported to China and Bone would be caught in the middle with That so as a result that is a Potential Threat to Boeing in the short term but If you're watching this down the road Maybe this is something that is no Longer a threat but as of right now that Is something people are concerned about But anyways that wraps up the pros and Cons here guys just to recap we like Boeing because they are involved in Global markets it's a company that gives You Global Market exposure they operate On a backlog so they don't have a lot They don't have any inventory really

Because anything they're producing has Already been purchased or they know They're going to sell it they are being Very generous with share BuyBacks 9.2 Billion in 2017 they have record high Orders for 2017 and a record high Backlog we know that uh they are Increasing their fuel efficiency in Their aircrafts which gives Airlines Incentives to upgrade we know that fuel Prices have been low over the last Couple of years due to Trump being in Office there is political favor involved With the defense industry Street Spending we have seen a 7.5 percent Increase in global airline travel in 2017 but the problem areas for Boeing Are the fact that these are cyclical Industries and they are in favor for Boeing right now but that could shift at Any point in time we also know this Stock is a darling of Wall Street it's Already priced up quite a bit with a Very high p e and there are potential Threats with China involved uh just with What's going on between Trump and these Tariffs and China but anyways that's Going to wrap up the pros and cons now We're going to move on and talk about The moat or barriers to entry associated With Boeing and there are quite a few to Mention here so number one in number two We have touched on already but it's the Fact that there is a defense duopoly and

A commercial airline duopoly between Boeing Lockheed Martin and Airbus which Puts them in a very comfortable position Because there's not a lot of competition Out there but the question being why is This the case why is there not a third Company that's involved with uh Airlines Commercial airlines in defense there's a Couple of reasons for this so as far as Is the commercial airline business goes It's very expensive to produce an Airplane in fact the actual cost of a Boeing 777 is around 320 million dollars So if you wanted to start producing Commercial airplanes think about the Amount of upfront Capital you would need Just to build one of these things and if You're building just one of these how Could you compete with a company that is Building dozens of these every single Month that is why you don't see a lot of People or companies entering the Commercial airline space and the same Exact thing ties in with the defense the Actual products they're producing are Multi-million dollar pieces of equipment And nobody really wants to get involved With this business because Lockheed Martin and Boeing are already doing such A fantastic job the other thing is the Fact that Boeing and Lockheed Martin Have defense contracts with the Government it would be very difficult For another company to step in there and

Win over the government and get those Contracts so most companies are just not Even going to try these are all very Strong barriers on both the commercial Airline side of the business business And the defense side of the business for Boeing the other barrier to entry for Boeing is that brand recognition and Trust as we said this company is 101 Years old people trust Boeing they trust The Boeing name and people who fly on Commercial airlines often see that They're in a Boeing and they trust that Aircraft because they've been in it many Times a lot of people would be hesitant To jump in a brand new Airline or a Brand new uh aircraft that has no time Tested durability they might be worried About that since this is something that Could potentially save their life or Take their life because uh it's a very Dangerous thing you're doing when you're Flying if something were to go wrong so People do trust Boeing for that reason They're a very dependable and Trustworthy name and they've been doing This for over 100 years and then the Final barrier to entry for Boeing is the Fact that there was a lot of research And development and upfront costs that Go into producing these aircrafts they Have tons of patents on their aircrafts And all their different products they're Offering so this is just a business that

People do not want to get into into it's A very expensive business and there are So many reasons why Boeing has great Protection or a great moat here and so As far as companies out there go that We've looked at I would say Boeing has One of the strongest moats out there or The greatest barriers to entry as far as New people coming in and threatening Boeing's business and trying to Edge out Some of that business so that again is One of the reasons why I love Boeing as An investment but again it just comes Down to the fact that this has been a Darling of Wall Street and that stock is Relatively expensive right now if I were Looking to invest in Boeing stock I Would try to wait for some kind of a Correction or a pullback to buy some Shares because right now that price to Earnings ratio is significantly higher Than the piers but anyways guys that's Going to wrap up the beginning of this Analysis now we're going to jump over And look at the fundamentals of Boeing Okay so now we are going to look at the Fundamental side of Boeing as an Investment and as always we are going to Start with the assets so what we can Gather looking at the annual and Quarterly data in terms of assets is That total assets declined from 20 2015 To 2016 but increased 2.6 percent from 2016 to 2017 and total assets grew three

Percent from quarter one of 2017 to Quarter four of 2017. so that slow Growth is very typical of Blue Chip Investments sometimes you don't even see Any growth at all like with a stock like A t you really don't see much growth at All with the total assets they are just Consistent over long periods of time but We are seeing slow and consistent growth With Boeing since 2016 at a rate of Around three percent now on the other Hand we are seeing that cash and cash Equivalents declined from 2015 to 2016 And remained flat from 2016 to 2017 and So the slow growth of assets and Consistent cash pile is very typical of A blue chip stock I would like to see That cash pile growing for Boeing but They do have a lot more going for them That we can kind of look past that at This point in time and that slow growth Of assets is definitely nothing to write Home about and that is certainly not the Reason why Boeing stock is up so much Over the last year that will be revealed A little bit later on in this video we Will get into that but it's certainly Not a result of the cash pile or the Growth of assets moving on now we are Looking at the total liabilities and What we can see here is that total Liabilities have increased every year Since 2014 at an average rate of three Percent per year so as we said before

Total assets grew three percent from Quarter one of 2017 to quarter four of 2017 while total liabilities grew 2.7 Percent so that's reasonable we see here That assets and liabilities are growing At pretty much the same rate so no Problems there long-term debt has Increased every single year since 2014 But long-term debt is a very small piece Of the debt for Boeing most of their Debt is actually short-term or current Liabilities long-term debt increased 6.3 Percent per year since 2014 meaning most Of the debt growth since 2014 has been Long-term debt and current assets have Slim coverage of current liabilities a Ratio of 1.16 to 1 in quarter 4 2017 It's certainly acceptable but I'd like To see a higher number with that Typically that indicates better coverage Of their deaths but as we can see here Looking at the current liabilities and Long-term debt we can see most of the Debt Boeing has is current liabilities Or short-term debt and looking at the Growth of total assets compared to Total Liabilities we can gather that total Debt growth as keeping Pace with asset Growth so there are no problems there And they do have coverage of their debts As current assets cover current Liabilities so most of the debt growth Since 2014 has been long-term debt and There is really nothing jumping out here

Out of the ordinary as far as the Liabilities go for Boeing moving on now We are going to be looking at the income Statement and this is where we start to Understand why Boeing stock is up so Much over the last year gross profit Increased 25.7 percent from 2016 to 2017 Primarily due to a sharp decrease in Cost of Revenue as we can see there from 2016 to 2017 total revenue was very Consistent I went from 94.5 billion to 93.3 billion so total revenue actually Decreased but if you look at cost of Revenue cost of Revenue went from 80.7 Billion on 94.5 billion in Revenue to 76 Billion on 93.3 billion in revenue and As a result we saw a sharp increase in Gross profit in 2016 gross profit was 13.7 billion and a 2017 gross profit was 17.3 billion so that was a 25.7 percent Increase and this indicates improved Efficiency in the business and just a Better business model that is right There the reason why Boeing stock has Been up so much over the last year is Because we are seeing improved Efficiency of the business and as a Result much higher gross profit and much More net cash flow from operations so as A result of this net cash flow from Operations has increased every year Since 2014 at an average rate of 15 Percent per year of very very strong Number and net cash flow from operations

Increased to 25.7 percent from 2016 to 2017 again due to the improved Efficiency of the business so what we Can gather here looking at this is that Total revenue has increased in every Quarter in 2017 gross profits increased Overall from quarter one to quarter four Of 2017 and there was significant Improvement here with the business model For Boeing as cost of Revenue Significantly declined in gross profit Significantly increased resulting in Significantly higher cash flow from Operations which is a big plus for Investors that right there is the main Reason why Boeing is the darling of Wall Street right now or at least it was in 2017 we're going to talk about how the Dow Jones Industrial Average has been Dragged down in 2018 and Boeing is being Caught up in a broad Market correction Later on in this analysis so as you can Tell looking at these two charts it's Very clear to me that 2017 was the year For Boeing 2017 was Flawless for this Company they went off without a hook They were the top performing stock of The Dow Jones Industrial Average but 2018 has been a little bit shaky for Boeing so let's go ahead and start from The top here so booming stock has been Out of Terror over the last year still Up 83.5 percent in the last year Absolutely insane keep in mind this is a

Company that's over a hundred years old To see a stock go up 83.5 percent in one Year is insanity now this is compared to A 15.8 percent return from the Dow Jones Industrial Average keep in mind they're A component of that index and obviously They're the top performer and over the Last five years Boeing stock is up 278 Percent compared to a 64.2 percent Return from the Dow so they've Significantly outperformed the index Over the last year and the last five Years and as we said Boeing was the top Performing stock on the Dow Jones Industrial Average in 2017. now on the Other hand 2018 has been very shaky for This blue chip Giant and as of this Recording Boeing stock is down 10.7 Percent from the February every Peak so It's unclear whether the stock is just Blowing off some steam if they're caught Up in a broad Market correction or if We've reached the ceiling here for Boeing as far as where the stock is Going to climb because it's certainly Not typical to see a blue chip giant Like Boeing climbing 83.5 percent over The last year that number is just Astounding so I would say that the high P e ratio and Rapid appreciation of Boeing stock is concerning as an Investor and if you're looking into Boeing stock I would not recommend lump Sum investing in Boeing at this point in

Time just for those two reasons uh the High p e ratio the rapid appreciation And also the shaky stock performance Here over the last couple of months or Two here in 2018 I would recommend a Strategy of dollar cost averaging or Possibly waiting for a substantial Correction or pullback before you added A sizable position in Boeing to your Portfolio and then finally we're going To wrap up here with some key financial Notes so as we saw Boeing delivered Record AI earnings and operating cash Flow in 2017 and Boeing also delivered a Record high number of airplanes in 2017 And I just want to show you guys the Size of their backlog it's absolutely Astounding but right now they have a 421 Billion dollar commercial airplane Backlog they're operating on and they Have a 50 billion dollar defense backlog So this is all orders that they have to Fill it's absolutely amazing how much Money they have potentially coming to Them uh over the next couple of years But it's crazy to think about that that They know that they're going to have Right there 471 billion dollars coming In just from their backlog so they had Very strong financial guidance for 2018 They're hoping to do very well in 2018 And everything is certainly pointing Towards that and productivity and Business operation improvements resulted

In a sharp increase in cash flow in Earnings in 2017. we saw that looking at The total revenue there and cash flow From operations that right there being The main reason why that share price has Appreciated so much in the last year and In 2017 and I do want to say that I do See Boeing as a great investment I love Everything about this company I just Don't love the valuation at this point In time they have a high p e ratio Compared to their peers and that stock Price has just gone crazy over the last Uh 15 months or so and for those reasons I am concerned about lump sum investing In Boeing but if you're thinking about Dollar cost averaging or taking a small Initial position in this company I don't Think you're wrong for doing that Everything is looking very positive for This company but do keep in mind this is A cyclical business as a result of fuel Prices the political climate and whether Or not people are traveling and right Now all three of those things are in Favor for Boeing but that could change Realistically at any point in time but Anyways guys thank you so much for Watching this I hope you enjoyed it and I will see you in the next video

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