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Boeing Wins $3.3B Order for 737 MAX 8 Jets from CDB Aviation

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Leading commercial aircraft maker The Boeing Company (BA - Free Report) has received an order for 30 737 MAX 8 airplanes from CDB Aviation Lease Finance, based in Dublin, Ireland. The company operates as a wholly owned Irish subsidiary of China Development Bank Financial Leasing Co Ltd.

Details of the Deal

Value of the airplanes at current list prices comes to nearly $3.3 billion. However, it goes without saying that CDB Aviation will surely enjoy a substantial discount on this amount.

Previously, Boeing's orders & deliveries website had already attributed the order to an unidentified customer.

Notably, Boeing’s 737 MAX family of commercial aircraft incorporates the latest-technology CFM International LEAP-1B engines to deliver the highest efficiency, reliability and passenger comfort in the single-aisle market. In particular, these jets boast a 40% smaller noise footprint than today's single-aisle airplanes.

Recent Orders

Boeing saw a string of order wins from a number of airlines since the start of 2017. On Feb 16, the company received an order for five 787-9 Dreamliners from Juneyao Airlines, a major private carrier based in Shanghai, China. The deal is valued at nearly $1.32 billion.

Again, on Feb 9, Boeing received an order for 39 wide-body airplanes from Singapore Airlines Ltd. The value of the airplanes is nearly $13.8 billion.

Single-Aisle Aircraft in Demand

Over the next 20 years, Boeing envisions demand for over 39,620 commercial airplanes, valued at more than $5.9 trillion. About 38% of the total commercial demand is likely to come from Asian markets. Single-aisle airplanes will comprise nearly 70.6% of the new deliveries, with airlines requiring over 28,140 jets of this category.

India, in particular, appears to be a promising market for Boeing. According to the company, the country will need 1,850 new planes, worth $265 billion, in the next two decades, up 6% from the year-ago estimate.

Boeing expects single-aisle jets to be the major driver of demand growth, comprising 71% of the total projection. While the new 737 MAX 8 and 737-800 will likely grab a lion’s share of the new orders, Airbus Group SE’s (EADSY - Free Report) A320neo is expected to pose a significant competitive challenge.

Boeing’s 737 is one of the best-selling planes in the single-aisle market, thanks primarily to its fuel efficiency and passenger comfort. To maintain its dominance in the commercial aerospace market, the company continues to invest in research and development to upgrade and churn out upgraded versions of its existing planes.

2016 Order Details

Boeing’s 2016 order details show that the company has booked 668 net commercial orders (accounting for cancellations), valued at $94 billion at current list prices. The figure includes 550 orders for the 737, followed by 58 orders for the 787. On the other hand, Airbus Group registered net bookings of 731 aircraft, thereby beating Boeing.

Since, Boeing and Airbus are the two largest players in the commercial aircraft space their direct rivalry is quite evident, which leads to intensifying competition in the industry. At the end of 2016, total commercial airline industry backlog stood at 12,589 aircraft, out of which Airbus’ share was 55% or 6,874 aircraft, while Boeing had a 45% share or 5,715 aircraft. Going forward, in 2017 as well we expect to witness similar strong demand for Boeing’s commercial jets.

Price Movement

Share price of Boeing has increased 41.7% over the last 12 months, outperforming the Zacks categorized Aerospace–Defense industry’s gain of 29.6%. This could be because the company’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases as well as earnings accretive acquisitions. The stock’s performance is in line with that of General Dynamics Corp. (GD - Free Report) and Huntington Ingalls Industries, Inc. (HII - Free Report) , which also surpassed the industry mark.



Zacks Rank

Boeing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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