More Orders for Boeing's 737 MAX

The Boeing Company (BA - Analyst Report) has received an order worth $6 billion at current list prices for 60 737 MAX airplanes from Aviation Capital Group (“ACG”). The order, consisting of 50 737 MAX 8s and 10 737 MAX 9s was finalized last month.

The Boeing 737 MAX – is a new family of aircraft being developed by Boeing Commercial Airplanes. It is based on the Boeing 737 Next-Generation family and is the fourth generation of the 737 family.

The Boeing 737 MAX is an improvised version of the Next-Generation 737. It has more advanced fuel efficiency as it is equipped with new LEAP-1B engines from CFM International and improvements such as the Advanced Technology Winglet. Apart from maintaining an 8% operating cost advantage, Boeing 737 MAX’s developed technology reduces fuel burn and CO2 emissions by nearly 13%. Moreover, its noise footprint is 40% smaller than other current single-aisle airplanes. The first delivery of 737 MAX is expected in 2017.

These non-comparable efficiencies have helped Boeing in creating a remarkable number of orders. With this order in hand, Boeing now has orders for 1,029 737 MAX airplanes from airlines and leasing companies worldwide. In October 2012, Boeing had also received an order worth $5 billion for 20 737 MAX 8s, 17 737 MAX 9s and 13 Next-Generation 737-900ERs.

Boeing is trying to move hand in hand with the growing number of orders. During the first quarter of 2012, production had increased from 31.5 to 35 airplanes per month. The company continues to increase the production rate to 38 airplanes per month beginning in 2013 and 42 airplanes per month beginning in 2014. In first half of 2012, the majority of orders received were for 737 MAX.

Based in Chicago, Boeing Company is a premier jet aircraft manufacturer and one of the largest defense contractors in the U.S. The company’s customers include domestic and foreign airlines, the U.S. Department of Defense, the Department of Homeland Security, the National Aeronautics and Space Administration, other aerospace prime contractors, and certain U.S. government and commercial communications customers.

The Boeing Company is among the best positioned in its sector due to its balanced exposure to commercial aircraft and defense equipment. Boeing’s revenue exposure is spread across more than 90 countries around the globe.

Due to the continuing recovery of the global economy, demand for Boeing’s Commercial Airplanes is benefiting from a steady improvement in passenger and freight traffic. Moreover, this continuous increase in number of orders would boost the company’s top and bottom lines.

However, headwinds over the global airline industry along with expected cutbacks in the U.S. defense budget are the major concerns. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

The company mainly competes with Lockheed Martin Corporation (LMT - Analyst Report) and Northrop Grumman Corporation (NOC - Analyst Report).