Back to top

Why Value Investors Should Consider Boeing (BA) Right Now

Read MoreHide Full Article

Before today’s 1.8% surge, shares of Boeing (BA - Free Report) had sunk over the last week as investors began to price in possible tariff-related backlash aimed at the aerospace giant. With that said, much of the Chinese retaliation news is relatively speculative at this point, while Boeing’s new lower price is much less debatable.

Chinese Speculation

Reports began to surface last week that one possible retaliatory action China could take against the U.S. after President Donald Trump’s new steel and aluminum tariffs might be to back out of—or tweak—some of its current multibillion-dollar deals with Boeing.

Boeing announced that China Aviation Supplies Holding Company ordered 300 planes in a deal worth $37 billion last November. Boeing has also estimated that China could purchase upwards of $1 trillion worth of airplanes over the 20 years, with Chinese customers set to buy roughly one out of four aircrafts Boeing assembles.

What has some investors worried is that Chinese companies and or the government could choose to buy their planes elsewhere, including from European rival Airbus (AIR - Free Report) , as a way to strike back against Trump’s steep tariffs aimed almost entirely at China. Boeing’s CEO Dennis Muilenburg addressed the issue last week, taking a very balanced approach.

“We've had a very good dialogue with the administration and our Chinese customers, Chinese government. ... It's important that we have a balanced approach to China. …We need fair trade, fair competition,” Muilenburg told CNBC last week. “But as you look at the China market from an airplane standpoint… It's becoming the world's biggest airplane market."

Value

It is unclear exactly what might happen between Boeing and China, but the company does have billions of dollars worth of U.S. contracts and sells planes throughout the world and the rest of Asia. Nevertheless, this recent downturn has forced Boeing to return to a more reasonable price point for many investors.

Boeing stock had skyrocketed nearly 85% over the last year, including a 12.5% surge since the start of 2018. These massive gains caused Boeing’s P/E ratio to reach 30.6, the highest earnings multiple that Boeing had traded at in years. For instance, the company was trading at 16.8x forward earnings at the end of the fourth quarter of 2016 and 26.8x at the end of the same period in 2017.

Now, thanks to its brief sell-off, Boeing is currently trading at around 23.6x, which is only a slight premium compared to one of its biggest competitors, Lockheed Martin (LTM - Free Report) .

Bottom Line

Boeing is a Zacks Rank #1 (Strong Buy) and also currently boasts an “A” for Growth in our Style Scores system.

On top of that, Boeing is certainly much cheaper than it was just a few months ago and has historically traded at a premium compared to the “Aerospace – Defense” industry average, which means now might not be a bad time to buy the stock as its bottom line is also projected to expand at a solid rate for a company of its age and size.

Can Hackers Put Money INTO Your Portfolio?

Just last year, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.

Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.

Download the new report now>>




In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


The Boeing Company (BA) - free report >>

AAR Corp. (AIR) - free report >>

LATAM Airlines Group S.A. (LTM) - free report >>

More from Zacks Stocks in the News

You May Like