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How Boeing's Monster Year Has Headlined the Dow's Sky-High 2013

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As the markets and the Dow Jones Industrial Average (DJINDICES: ^DJI  ) turn toward the end of 2013, it's a great time to look back at the year and see how the Dow and its 30 blue-chip components have fared year to date.

The Dow's had a spectacular year so far, gaining more than 18.5% year to date and crossing the 16,000-point mark in its record march. Yet no component on the Dow even has come close to sniffing Boeing's (NYSE: BA  ) unrivaled year. Boeing's stock has blown up by nearly 80% as the world's preeminent aerospace manufacturer has rallied despite a major setback to kick off 2013. What's Boeing done to succeed? Let's look back at this company's rise this year.

Blue skies for Boeing's airliners
Boeing's sales have lifted off without any hint of turbulence this year, gaining more than 5% year to date through the first nine months of 2013. That might not seem like a lot, but for a company of Boeing's size, it's an impressive figure. The company's operating earnings have jumped even more, gaining more than 8% through that time, so it's not as if Boeing isn't making good use of its new business.

This has all come despite the grounding of the 787 Dreamliner back in January that had analysts shaking their heads. Battery problems and more led to the FAA's decision to ground U.S. 787s, and the saga drew out all the way until late April, when the FAA officially cleared airlines to begin flying the craft once again.

Yet that hasn't stopped Boeing's civilian aircraft business at all. Granted, Boeing's trusty 737 line of airliners has been the big winner so far in 2013, but the company's soared above rival EADS'  (NASDAQOTH: EADSY  ) Airbus in its ability to swallow up orders. Boeing scored more than $100 billion in total new aircraft orders at June's Paris Air Show less than two months after the FAA cleared the air of the 787's grounding, including a huge order from Ryanair for 175 737-800s.

Just this week, Boeing added to its monster year for civilian aircraft by racking up another near-$100 billion order haul at the Dubai Air Show. Boeing's 777 line of aircraft impressed buyers in the Middle East, and the company blew by Airbus, which pulled in only around $40 billion in new orders.

However, it hasn't all been good news for Boeing against its top rival. Airbus outsold Boeing in October, and the company's outsold Boeing through the year as well. Still, with civilian aircraft sales up 9.5% year over year through the first nine months of 2013 and segment operating margins jumping to double-digit percentages, Boeing investors hardly have reason to complain about the firm's dominant airliner business.

The defense gives ground
Boeing's military aircraft segment hasn't performed quite so well. This was to be expected: After all, sequestration's budget cuts have come down especially hard on the Pentagon, making life tougher for defense contractors in 2013 and going forward.

The company's defense, space, and security unit's revenues climbed meekly through the first nine months of the year, but Boeing's contractual backlog has fallen by around 8% in this unit. Furthermore, sales have slipped at its military aircraft unit, the largest division of this business, and military aircraft operating margins fell nearly an entire percentage point to 8.9% as compared to last year.

Boeing's 2013 for its military division took its hardest hit back in September. It seemed to be the odds-on favorite to win South Korea's fighter jet competition with its F-15SE Silent Eagle. South Korea offered $7.7 billion for the contract, and both Eurofighter's Typhoon and Lockheed-Martin's (NYSE: LMT  ) F-35 ran over budget. Boeing had no competitor left standing in its way.

Then things took an unexpected twist as South Korea's military leadership deemed the F-15SE as unsuitable for protecting the country against North Korea and other attackers, opting instead to reopen the competition. It was a stinging blow for Boeing, especially now that Lockheed's back in the game with the F-35, a costlier but more advanced aircraft that seems the likely favorite to supply the Korean military.

That won't help Boeing's military division get back on track. However, the company's operations in orbit have performed much better: Its network and space systems branch has managed nearly 6% sales growth through the year's first nine months and has grown its operating margin by more than half a percentage point. It's only around half the size of Boeing's military aircraft business, but this segment's growth has been a key reason that its total defense, space, and security business has managed to gain ground this year.

More to come from Boeing?
All in all, the success of Boeing's soaring civilian aircraft business has outweighed the pressure and missed opportunities from the company's military aircraft segment. Boeing's total backlog continues to rise, and the 787's emergence from the grounding delay relatively unscathed has maintained optimism in the company's flagship airliner.

2013's been a good year for Boeing, but if it can keep up the momentum it's captured this year, this stock's run might be just getting started for investors.

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Related Tickers

9/29/2016 4:35 PM
^DJI $18143.45 Down -195.79 -1.07%
BA $131.03 Down -1.20 -0.91%
Boeing CAPS Rating: ****
EADSY $14.82 Up +0.01 +0.07%
Airbus CAPS Rating: ****
LMT $242.34 Down -3.41 -1.39%
Lockheed Martin CAPS Rating: ****