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Boeing Gets Multi-Billion MAX Order

BA GD LMT

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Leading commercial airplane producer, The Boeing Company (BA - Analyst Report) received a multi-billion order for its 737 MAX model from Aviation Capital Services LLC, a subsidiary of the State Corporation Russian Technologies (Rostech).

Rostech announced a commitment to purchase 35 737 MAX airplanes for Russia and the Commonwealth of Independent States (“CIS”). The order is valued at more than $3 billion at current list prices.

The 737 MAX is a new-engine variant of the world's best-selling airplane and builds on the strengths of today's Next-Generation 737. The 737 MAX incorporates the latest-technology CFM International LEAP-1B engines to deliver the highest efficiency, reliability and passenger comfort in the single-aisle market. As per Boeing, airlines operating the 737 MAX will see a 13% fuel-use improvement over today's most fuel efficient single-aisle airplanes and an 8% operating cost per seat advantage over tomorrow's competition. Boeing currently has 858 orders for the 737 MAX.

Aviation Capital Services LLC is one of the leading aircraft leasing companies in Russia and CIS.

Boeing enjoys a unique position as the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries, and is also one of the largest aerospace and defense contractors. Besides, its revenues are spread across more than 90 countries around the globe.

Looking forward, Boeing recently taking into account its performance in the first nine months of 2012, raised its full year 2012 earnings per share guidance to a range of $4.80–$4.95 from its earlier guidance range of $4.40–$4.60. The company also raised its revenue guidance for 2012 to the range of $80.5 billion – $82 billion versus the earlier range of $79.5 billion–$81.5 billion.

The company expects its Commercial Airplanes' 2012 deliveries for 2012 between 585 and 600 airplanes, which are already sold out. This includes an expected 70 to 85 787 and 747-8 deliveries. Commercial Airplanes' 2012 revenue is expected to be between $47.5 billion and $49.5 billion with operating margin hovering around 9.0%.

In the defense space, the company expects defense revenue for 2012 to be between $32.5 billion and $33.0 billion versus its earlier range of $31.5 billion and $32.0 billion with operating margin greater than 9%. Boeing Capital Corporation expects that its aircraft finance portfolio will continue to decline in 2012.

Boeing currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock. This is in sync with other aerospace and defense behemoths, General Dynamics Corporation (GD - Analyst Report) and Lockheed Martin Corporation (LMT - Analyst Report).

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