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Boeing: Spinner or Winner?

We've all heard the rumors. Lockheed Martin's (NYSE: LMT  ) new fighter jet is a boondoggle. The engine United Tech (NYSE: UTX  ) designed isn't as good as might be hoped, and an alternative engine from General Electric (NYSE: GE  ) is having trouble getting out of committee. The F-35 isn't all that much better a dogfighter than the F/A-18. To top it all off, at a reported $1 trillion price tag, some say the F-35 costs too much.                                

But there's a plus-side to all Lockheed's troubles … for Boeing (NYSE: BA  ) . Yesterday, Lockheed's nemesis began making noises about how foreign fighter jet purchasers are growing disenchanted with the F-35, and expressing interest in buying Boeing's F/A-18 Super Hornet instead. Supposedly, buyers from Southeast Asia all the way to the Middle East are queuing up to place F/A-18 orders, and turning up noses at the F-35.

Don't believe it. From where I sit, it sounds like Boeing is "talking its book." It's trying to create positive buzz on the Hornet, in hopes of convincing buyers that "everyone else" is buying it -- so they should, too.

An intriguing idea
Oh, I'll admit the idea has some merit. After all, the U.S. government is buying F/A-18s to "fill the gap" in its combat air patrol. I've argued for years that Boeing will continue making similar sales to budget-minded foreign air forces as well. It's not out of the fighter jet business yet.

But consider: Given their druthers, do you really believe foreign buyers prefer the F/A-18 over the F-35? In the Mideast, Israel is buying as many of the latter as it can get its hands on. I can't imagine that Arab governments in the neighborhood relish the idea of bringing a fourth-generation knife to a fourth-generation gunfight. In Asia, China's well on its way to building a home-grown stealth fighter jet, and what Japan would really like is to buy itself a few F-22 stealth fighters. If that's not possible, I expect they'll be willing to trade down to the F-35 -- but not go back one whole generation and load up on F/A-18s.

I'll bet most countries in the neighborhood think similarly. My read on Boeing's announcement: Until it backs up its words with a few honest-to-goodness international sales contracts, this is mere sales puffery. As for the F-35: It remains the key reason for owning Lockheed today, and the basis of Lockheed's multidecade growth story.

Read along as the story progresses: Add Lockheed Martin to your Fool Watchlist.

Fool contributor Rich Smith holds no position in any company mentioned, but The Motley Fool owns shares of Lockheed Martin. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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10/21/2016 4:03 PM
BA $135.63 Down -0.21 -0.15%
Boeing CAPS Rating: ****
LMT $230.52 Down -1.31 -0.57%
Lockheed Martin CAPS Rating: ****
GE $28.98 Down -0.09 -0.31%
General Electric CAPS Rating: ****
UTX $98.67 Down -0.62 -0.62%
United Technologie… CAPS Rating: ****