What happened
Shares of Boeing (BA 3.26%) jumped 22.6% in July. Although shares had been trending upward since the beginning of the month, the biggest bump came in the wake of the company's impressive second-quarter earnings report on July 26.
With the company's impressive July performance, the stock is now up more than 65% in the two years since CEO Dennis Muilenberg took the helm.
Sales of Boeing's 787 Dreamliner contributed to the company's impressive cash flow in the second quarter. The stock market rewarded the company's performance by bidding shares up more than 22%. Image source: Getty Images.
So what
The aircraft industry has been (pardon the pun) flying high lately as airline ridership has soared and companies have cut costs. Boeing's chief rival, Airbus (EADSY 2.30%), is up nearly 50% in the past year, and other aircraft-related stocks, such as parts maker Heico (HEI 3.62%) and services company Air Transport Services Group (ATSG +0.00%), have jumped 50% or more.
For Boeing in particular, the second quarter was a bright spot. In nearly all respects, it was a huge improvement over Q2 2016, when the company recorded more than $2 billion in charges related to its 787, 747 and KC-46 tanker aircraft, causing it to post a $234 million loss. In Q2 2017, though, it beat analysts' estimates, posting a net profit of $1.76 billion on $22.7 billion in revenue.
Boeing also reported strong operating cash flow of $5 billion, and it certainly made use of the cash. The company repurchased 13.6 million shares for $2.5 billion. It also deposited $3.5 billion worth of shares into its pension fund, which frees it from needing to make further payments into the fund before 2021. That savvy move also scores the company $700 million in tax benefits.
Meanwhile, the company's backlog continued to grow, to $482 billion, which includes $27 billion of new net orders. Even given all this, though, a 22% jump in a single month for such a big company is noteworthy. It took the company's market cap from $117.5 billion at the beginning of the month to $143.3 billion at the month's end.
Now what
If you're lucky enough to own Boeing, you probably want to hang on to those shares. The company upped its guidance for EPS and cash flow for the year and lowered its guidance for expenses, indicating it expects the good times to continue to roll.
As for whether Boeing is a good deal at its current price -- that's a bit more complicated. Its price-to-earnings and price-to-free-cash-flow ratios are much lower than those of competitor Airbus (and Heico and Air Transport Services Group, too), and those metrics, coupled with its strong outlook, may indeed mean it's a bargain. But one thing's for sure: It's certainly less of a bargain in August than it was in June.
