Boeing Reveals Its Secret Customer

And the buyer of 40 shiny new 737s is ... General Electric!

Jan 21, 2014 at 8:58PM

In 2012, Boeing (NYSE:BA) landed orders from its customers for 1,203 airplanes (net of cancellations), beating Airbus's (NASDAQOTH:EADSY) tally by 370 planes.

In 2013, Airbus turned the tables on its rival, winning 1,503 net new orders, to Boeing's 1,355.

And in 2014? This is the year Boeing attempts to win back the crown as the world's biggest seller of commercial aircraft. Unfortunately, today's news won't help Boeing much with that.

Surprise! ... and disappointment
On Tuesday, just back from holiday, Boeing announced that the GE Capital Aviation Services arm of General Electric (NYSE:GE) has placed an order for 20 737 MAX 8s single-aisle airliners, and 20 Next-Generation 737-800s. 40 planes strong. GECAS's order is worth $3.9 billion to Boeing at list prices. Unfortunately, it turns out that all 40 of these plane orders were already accounted for on Boeing's periodically updated orders and deliveries page. (It's only that we didn't know that GECAS was the customer. Previously, Boeing had them attributed to an unidentified customer.)

As Boeing clarified in a press release today, GECAS now has orders in for 95 737 MAX planes of various sizes, and for an additional 387 Next-Gen 737s. This makes GE Boeing's best customer in the global aircraft leasing industry, having placed more "MAX" and more "Next-Gen" 737 orders than any other buyer. These orders add up to nearly 30% of the size of GECAS's entire plane fleet, which includes most of Boeing's other airplane models as well -- 747s, 757s, 767s, 777s, and 787s.

... and relief
The fact that GECAS's order isn't really new news (at least not for Boeing), but merely additional color on an order already placed, may disappoint Boeing shareholders. But this is actually good news for potential new buyers of Boeing stock. As understanding sinks in, Boeing's shares are giving back most of the gains they enjoyed during Tuesday's ordinary trading hours -- and returning the stock to what I have to think is a pretty nice price for long-term investors.

Valued at 25 times earnings today, Boeing is expected to grow earnings at about 11.5% annually over the next five years. On its face, that's not a particularly attractive valuation. However, what you may not realize is that Boeing throws off a whole lot more cash than its income statement currently lets on. Over the past year, Boeing generated more than $9 billion in free cash flow -- and more than twice its reported net income.

Valued on its free cash flow, and giving the company credit for its $6.3 billion in net cash on the balance sheet, the company sports an enterprise value of only 11 times annual free cash flow. For a company growing at 11.5% annually, that's a very nice price indeed.

Oh, and one more thing
Did I mention that Boeing pays its shareholders a 2.1% dividend yield? Mustn't forget that bit -- because over time, generous dividend-paying stocks like Boeing can make you rich. While they don't garner the notability of high-flying tech stocks, dividend-paying stocks are also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Electric. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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