Boeing Propels the Dow Jones Higher

Boeing is up on orders and an analyst upgrade, but a new report from the NTSB could mean short term trouble.

May 22, 2014 at 1:30PM
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Boeing (NYSE:BA) is leading the Dow Jones Industrial Average (DJINDICES:^DJI) up today following an analyst upgrade and a spate of new orders for its 737. As of 1:30 p.m. EDT the Dow was up 23 points to 16,556. The S&P 500 (SNPINDEX:^GSPC) was up 7 points to 1,895.

Boeing announced this morning that it had received 75 new orders this week for its 737 line. 15 orders came from Thailand's Nok Air, 10 orders came from Eastern Air Lines, and the remaining 50 were not identified. The 737 has now sold 360 net orders in 2014 -- 414 orders minus 54 cancellations.

Boeing's increasing order flow for the 737, as well as the 787 Dreamliner, is one of the reasons that analysts at Drexel Hamilton upgraded the stock from hold to buy, updated their earnings estimates for the year, and raised their price target on the stock to $153. With Boeing reiterating its forecast for this year of adjusted earnings per share of $7.15 to 7.35 and sales between $87.5 billion and $90.5 billion, that would give the stock a forward P/E of 21.

At yesterday's annual investor meeting, Boeing CEO Jim McNerney said, "We want to be more like Apple." He went on to explain:

We're still going to deliver revolutionary capability. The way we deliver is to build on technology we have. We get to the same end point if you take 10 low-risk, well-managed steps rather than one big step.

Basically, McNerney means that Boeing will focus on more incremental innovation, rather than big, all-new projects such as the 787 Dreamliner.

One of those incremental steps might have to be to retest its lithium battery. This afternoon the National Transportation Safety Board released a report that criticized the Federal Aviation Administration for relying too heavily on Boeing to conduct tests for the safety of its batteries after battery fires grounded the 787 Dreamliner last year. The NTSB believes the FAA needs to review its testing processes and rely on independent experts outside the commercial aviation manufacturers.

Bottom line
There's a lot to like about Boeing. The company is getting more efficient, and its 787 Dreamliner and 737 are raking in orders. While today's report from the NTSB won't hurt Boeing's business in the long run, as Boeing will be able to solve any engineering problems, in the short run it could mean that the company has to redo tests of its lithium batters so that the NTSB is satisfied that they can be trusted.

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Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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