June 22, 2012
The following video is part of our "Motley Fool Conversations" series, in which industrials editor/analyst Brendan Byrnes addresses topics from across the investing world.
Boeing's share price has been stuck in the mud so far this year, essentially flat versus the Dow's gain of 5%. There are a few likely reasons for the underperformance, and one of the main ones is Boeing's defense segment. Now is not a great time to be in the defense contracting business, which accounted for 46.5% of Boeing's revenue in 2011.
In the U.S., lawmakers have already agreed to slash the Pentagon's budget by $500 billion over the next 10 years, and another $500 billion will be cut if nothing is done to stop sequestration by January 2013. This would be a severe problem for defense contractors. Boeing does have its massive commercial aviation business to offset any declining revenue, so it's better insulated than most. That's the main reason why despite the defense exposure, Brendan sees opportunity in Boeing. The stock is trading for cheap, and Boeing should be a huge beneficiary of the upcoming aviation boom worldwide. Check out the video below for more on Boeing's future prospects.
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