Company profile
Commercial jumbo jets and defense manufacturer
Boeing (ticker: BA) is one of only two commercial aircraft in the world, the other being Europe’s AirBus (ticker: EADSY). It is also one of the five largest arms dealers in the United States, including Lockheed Martin (ticker: LMT), Northrop Grumman (ticker: NOC), Raytheon Technology (ticker: RTX), Boeing, and General Dynamics (ticker: GD).
Note: The long-developed commercial aircraft C919 of China’s Commercial Aircraft Corporation of China (COMAC) will officially enter the market in 2023, join customers’ aircraft fleet, and start the operation; therefore, it will soon break the long-term duopoly of Boeing and AirBus.
Boeing mentioned in my latest two books
I have discussed this company in my recent two books; including:
- In “The Rules of Super Growth Stocks Investing“,
- 3-1, page 150-151
- In “The Rules of 10 Baggers“,
- 3-6, page 163
Why we need to discuss Boeing?
Since Boeing produces jumbo jets and is itself a major manufacturer of defense weapons in the United States, the upstream and downstream supply chains are very large and complex. The number of suppliers announced by Boeing itself is as many as 12,000, which is so important that it directly affects the United States’s GDP, it is a typical representative of industry and manufacturing of United States. Therefore, it is suitable for investment presentations in industry and manufacturing, which is why this company must be mentioned in both of my books.
Boeing’s main business
Boeing’s main business is the manufacture of aircraft (especially commercial passenger aircraft). In 2020, Boeing produced more than 900 aircraft per year, which means that one aircraft can be produced in less than 10 hours. By comparison, Airbus expects to deliver 700 commercial jets this year.
According to Boeing’s annual report, the company’s main business are as follows:
| Business segment | Scope |
| Boeing Commercial Airplane (BCA) | Manufacture and sales of 737, 747, 767, 777, 787, 797 and other large commercial aircraft |
| Defense, Space＆Security (BDS) | Defensive products, like A10, B-52, C-17, E-3A, F-15, MQ-25A, F-18, F-151, MH-6 helicopter, AH-64 Apache helicopter, P8, AGM-84 Harpoon anti-ship missile, etc. |
| Boeing Global Service (BGS) | Provide after-sales service for Boeing customers; including parts replacement, maintenance, technical support, product upgrades, product training, etc. |
| Boeing Capital (BCC) | Boeing’s venture business like acquisitions and investments. |
Business performance
Company performance comparison
| Metric | Boeing | Airbus | Lockheed Martin | Northrop Grumman | Raytheon Technology |
| Year 2021 revenue (US$ million) | 62,286 +7.09% | 59,354.7 -2.65% | 67,044 +2.52% | 35,667 -3.08% | 64,388 +13.79% |
| Gross margin | 8.33% | 17.7% | 13.57% | 20.38% | 20.22% |
| Operating margin | (1.1)% | 8.5% | 11.67% | 21.01% | 10.59% |
| Net margin | (6.75)% | 8.08% | 9.42% | 19.64% | 6% |
Stock valuation
| Metric (10/26/2022) | Boeing | Airbus | Lockheed Martin | Northrop Grumman | Raytheon Technology |
| Market Value (US$ billion) | 87.08 | 81.748 | 120.59 | 81.49 | 130.46 |
| Share price | 146.65 | 25.95 | 460.15 | 526.75 | 88.36 |
| P/E | 0 | 20.93 | 21.13 | 14.68 | 29.71 |
| P/S | 1.38 | 1.54 | 1.91 | 2.36 | 2.03 |
| Dividend yield | 0 | 1.57% | 2.61% | 1.31% | 2.49% |
| Stock performance in past 5 years | -42.82% | +3.51% | +49.4% | +76.96% | +18.35% |
In a special business
Jumbo aircrafts have never been ordinary business
The global jumbo jets market, which has been dominated by the duopoly for the past few decades, is now determined to be broken, because Chinese-made jumbo aircraft have appeared and entered the Chinese and international markets this year.
Boeing and Airbus have long monopolized the world’s large aircraft. Both the United States and Europe have blatantly violated the spirit of the WTO and offered unlimited subsidies, trying to squeeze each other out of this market and then monopolize the market.
Not only that, the two sides also used their best efforts to use their political influence to threaten and lure all over the world, and use the power of US and EU to provide infinite monetary subsidies and snatch orders. Using the various visible and under-the-table strengths of the United States and Europe, several former and potential large aircraft manufacturers (including Russia, Japan, Canada, Brazil, etc.) have been excluded for decades, leaving only Boeing and Airbus in the long run. Monopolize the global civil large aircraft market.
In addition, the two sides continued to report to each other and put pressure on the WTO to make a judgment against the other side. This ugly farce lasted for decades. It was not until this year that the jumbo jet C919 made by China left the factory this year. The main rival of the two sides has already appeared, and the two sides argument has stopped.
But this will start to change next year, because COMAC’s jumbo jets next year. No doubt, it will “gragually” cannibalize this market. Probally will not get sizable customer orders from Europe or US, but it will happen in next decade.
Don’t forget Boeing is a major defense manufacturer
As in the first table of this article, don’t forget that Boeing has long been the main defense manufacturer in the United States. In the column of Defense, Aviation, and Security Defense, Space & Security (BDS) in the table, I sort out the famous arms produced by Boeing.
According to the latest 2021 rankings by Sweden’s Stockholm Peace Research Institute (SIPRI), the United States is the world’s largest arms exporter, accounting for 38.6% of total exports. The United States accounted for five of the top ten arms exporters. This means that Boeing also sells arms to the world.
Long-term outlook is not opmistic
Boeing’s good days are over
Affected by the continuous suspension of the 737 MAX, the epidemic, and the three-year delay in delivery of the 777 X passenger plane, Boeing’s loss in 2020 will reach $11.9 billion, the largest loss in Boeing’s history. With revenue of $58.2 billion in 2020, Boeing lost money for the second consecutive year in 2020.
The 737 MAX incident can be said to be a watershed in the operations of Boeing and Airbus. At present, Boeing clearly has been behind Airbus in jumbo jets market. It will be difficult to return to the prosperity of the past in the short term.
Lose two 737 Max in a row
In 2018 and 2019, two Boeing 737 MAX plane crashes occurred, killing a total of 346 people. After that, the 737 MAX was suspended for 20 months by the US FAA. Countries around the world have made similar actions. The punishment brought Boeing’s business to a virtual standstill.
Almost lost the world’s largest market
Boeing’s 2021 report pointed out that China needs 8,700 new passenger aircraft in the next 20 years; the mainland China market accounts for 20 to 25% of Boeing’s global sales. China is the world’s largest jumbo jets market, accounting for almost 20% of the global market.
The relationship between China and the United States has been poor in recent years. In 2019, Boeing’s president in charge of China said: “It is well known for reasons” that it has not been able to sell aircraft in China for two years.
In 2022, the three major China airlines signed a $37.257 billion new aircraft order with Airbus to buy 292 new Airbus A320 NEO jumbo jet; it was a serious blow to Boeing.
The tragedy for Boeing is more than that. In order to welcome the visit of German Chancellor Schotts on 11/4/2022, CASC (China Aviation Supplies Corp.), a state-owned enterprise in charge of aviation equipment procurement, announced that it has reached a purchase agreement with Airbus and signed a purchase agreement for 140 aircraft, worth about $17 billion in contracts. Previously, in 2019, China Aviation Materials and Airbus signed an order for 300 passenger aircraft, including 290 A320 series and 10 A350 series aircraft, with a list price of about 30 billion euros.
What about Boeing? It must go back to 2017, when CASC signed an order for 300 passenger jets worth up to $37 billion with Boeing of the United States.
Closing words
Boeing has lost two main models in a row, and China-made jumbo jet C919 has appeared this year and entered the Chinese and international markets. Boeing has had no orders in China for years, and the situation is unlikely to change in the foreseeable future.
But investors should remember: Boeing is not an ordinary company, not just a company too big to fail. The United States cannot let it be the underdog, and the company cannot fail.
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