International commercial aircraft manufacturer, The Boeing Company (BA - Analyst Report) once again reported strong 2013 deliveries making it the world’s biggest plane maker for the second straight year. The aerospace major reported record jet deliveries for 2013, beating its own projection, driven by strong commercial numbers. The heightened deliveries were also a function of an increased production rate.
Boeing’s commercial delivery of 648 planes during 2013 accelerated 7.8% year over year thanks to robust 787 Dreamliner deliveries, which showed no slowing down even in the face of a series of technical glitches. The year-end figure is likely to beat deliveries of its main European rival Airbus, which has set a target of 620 deliveries in 2013. Airbus is scheduled to report its annual orders and deliveries on Jan 13.
Boeing dispatched a record number of 737 and 777 airplanes, representing growth of 6% and 18%, respectively, year over year. Notably, deliveries of the company’s much talked about Dreamliner soared 41.3%. In 2013, the company booked 1,531 gross commercial orders, up 14% from the prior year aided by huge orders from the Dubai Airshow held in November.
During the fourth quarter, Boeing delivered 172 jets compared with 165 deliveries in the comparable period last year. During the quarter, the 737 model continued to be the pillar of Boeing’s strength in the commercial airplane sector with deliveries of 110 airplanes, followed by its 777 and 787 models with 25 deliveries each. In the year-earlier period, the company delivered 105 units of the 737, 21 units of the 777 model and 23 units of 787.
Meanwhile, Boeing’s deliveries in the defense and space business numbered 52 in the fourth quarter and 171 in 2013 compared with 35 in the fourth quarter of 2012 and 154 in 2012. In 2013, numbering among the total deliveries were 48 F/A-18E/F and EA-18G fighter jets, 44 Chinook helicopters, and 37 Apache helicopters. The company also delivered 14 units of F-15, 11 P-8, 10 C-17 and 7 Satellites.
The gradual recovery in the global economy is bringing in a steady improvement in passenger and freight traffic. This is amply reflected in Boeing’s swelling order book. After dominating the Dubai Air Show with orders worth $101.5 billion, Boeing looks to be in an advantageous position when compared to archrival Airbus.
Recently, Boeing successfully resolved a crucial labor conflict by signing a deal with the members of the International Association of Machinists and Aerospace Workers last Friday, related to its new 777X aircraft production. With a 51% vote, the workers grudgingly approved of an eight-year contract extension that assures production of Boeing’s 777X aircraft in the Puget Sound area of Washington. This new agreement, which is effective through 2024, is in addition to the existing contract running through 2016.
The vote ensured that Boeing will be able to maintain its manufacturing operations at its commercial hub. As a result Boeing will not only avoid the risk of building new facilities and training a workforce for 777X production elsewhere but also considerably control costs.
At the same time, we are cautious of the headwinds in the global airline industry and cutbacks in the U.S. defense budget that have certainly shaken the confidence of many investors. The threat of sequestration has created significant planning difficulties for the customers and the aerospace industry at large.
Boeing currently has a Zacks Rank #3 (Hold). Better-ranked stocks from the sector include General Dynamics Corp. (GD - Analyst Report), Lockheed Martin Corp. (LMT - Analyst Report) and Northrop Grumman Corp. (NOC - Analyst Report), all with a Zacks Rank #2 (Buy).